Question

The government of Eduland provided generous unemployment benefits to all the unemployed workers. However, the new government that came into power reduced the amount of unemployment insurance paid to each worker. This increased the average number of hours spent daily by unemployed workers in looking for jobs. This suggests that ________ exists in the labor market in Eduland

Answer 1

Answer: Problem of moral hazard

Step-by-step explanation:

Here, in this particular case we can state that this denotes the problem of moral hazard. Moral hazard is referred to as the circumstance under which one organization tens to get involved in the an event which they are aware about being protected against risk and the other organization will further incur this cost. It arises mostly because of both the organizations having incomplete information and data regarding each other.