Question

Increases in unemployment benefits:

a. increase the natural rate of unemployment.
b. decrease the natural rate of unemployment.
c. always affect everyone in the economy the same.
d. always affect everyone in the economy the same by decreasing the natural rate of unemployment.

Answer 1

Increases in unemployment benefits do not affect the natural rate of unemployment.

Step-by-step explanation:

Increases in unemployment benefits do not impact the natural rate of unemployment. The natural rate of unemployment is influenced by factors such as market dynamics, shifts in productivity, and demographic changes that are beyond government control. Government policies can influence the natural rate of unemployment in the long run, but not specifically through unemployment benefits. Therefore, option c. 'always affect everyone in the economy the same' is incorrect.