Suppose the world price of cotton rises. The demand for labor among cotton-producing firms in Texas will (increase or decrease). The demand for labor among textile-producing firms in South Carolina for which cotton is an input will (increase or decrease). The unemployment resulting from such sectoral shifts in the economy is best described as (structural, seasonal, frictional or cyclical).

Which of the following polices would reduce the natural rate of unemployment in the economy?

A. Taxing the price of placing a resume or posting a job opening on a job search website.

B. An improvement to a widely used job-search website that allows it to match workers to find vacancies more effectively.

C. Establishing government employment agencies to connect unemployed workers to job vacancies.

When the world cotton price rises, the demand for labor in Texas for cotton producing firms will decrease, the reason for this is that when price of cotton rises producers will want to increase their production of cotton and in order to do this they will need additional labor. The reason that producers will increase their production is that the supply curve is upward sloping, which means that the higher the price the more the producers will be willing to produce.

The demand for labor in textile-producing firms in South Carolina for which cotton is an input will decrease. The reason for this is that cotton is a raw material in this case and when the price of a raw material is increased the supply curve shifts to the left, and when the supply curve shifts to the left producers will produce lesser quantities at the same prices, and this means that their demand for labor will decrease

The unemployment resulting from such sectoral shifts in the economy is best described as cyclical unemployment as this is a result of the overall demand in the economy not being able to support full employment

B. An improvement to a widely used job-search website that allows it to match workers to find vacancies more effectively.

This would decrease the Natural rate of unemployment because this would reduce frictional unemployment, as it would be easier for unemployed people to find vacancies and get jobs.