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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.

To determine

Whether the rise in unemployment rate in many European countries is due to cyclical unemployment or the natural rate of unemployment is to be determined.

Explanation

The unemployment rate of US is comparatively lower with respect to unemployment rate of European countries. The difference in the unemployment rates of both the countries are not because of recession but due to public policies of Europe. This type of public policies creates difference in supply and demand of workers in Europe.

The public policies play a supporting role for labor unions and result in high minimum wages in Europe. On the other hand, there are many unemployment benefits offered by the governments of these countries. These all factors are making workers less willing to work...

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