Final answer:
More generous unemployment insurance could lead to an increase in frictional unemployment as workers would have less urgency to quickly accept new job offers. so, option B is the correct answer.
Step-by-step explanation:
If unemployment insurance was made more generous such that it paid unemployed workers 95% of their former salary for 12 months, the most likely outcome would be an increase in frictional unemployment. Generous unemployment benefits can reduce the urgency for unemployed workers to accept new jobs, as they may take more time to search for positions that are a better match for their skills, qualifications, and preferences. Therefore, the time spent between jobs would likely increase.
Increasing unemployment insurance benefits to 95% of former salary for 12 months would decrease frictional unemployment, but not have a significant impact on the official unemployment rate.
Unemployment insurance that pays unemployed workers 95% of their former salary for 12 months would increase the generosity of the benefits provided. This increase in benefits would likely lead to a decrease in frictional unemployment. Frictional unemployment occurs when workers are between jobs and are actively searching for new employment, and the increased benefits may encourage workers to take more time during this search process. However, it would not have a significant impact on the official unemployment rate, as it primarily affects workers who are already unemployed.