Question

Suppose that consumers decide to walk to work more frequently and drive cars less. Companies that make walking shoes hire workers, while automobile companies lay off workers. This is an example of a. structural unemployment created by sectoral shifts. b. frictional unemployment created by efficiency wages. c. frictional unemployment created by sectoral shifts. d. structural unemployment created by efficiency wages.

Answer 1

Answer: Option C

Explanation: Shoe working companies are hiring workers and car manufacturing companies are laying of workers due to change in preference of consumers in general is an example of frictional unemployment created by sectoral shifts. Frictional unemployment means the unemployment caused when an individual is searching for a job and transitioning from one job to another. In this case due structural shift from cars to walk the workers of car factories have to shift to shoe factories.