Question

Indicate what happens to the unemployment rate in each of the following scenarios: (a) A financial firm goes bankrupt and lays off its workers, who immediately start working in other financial firms

Answer 1

Unemployment types for given scenarios vary: landscapers and factory workers are experiencing cyclical unemployment, coal miners and printers are facing structural unemployment due to industry changes, and a financial analyst moving for work is experiencing frictional unemployment. An increase in the unemployment rate isn't always bad, as the context matters.

Step-by-step explanation:

The types of unemployment that apply to each scenario are as follows:

• Cyclical unemployment applies to landscapers laid off due to a recession and its associated drop in housing construction.
• Structural unemployment affects coal miners laid off because of new EPA regulations that close coal-fired power plants.
• A financial analyst who quits their job to find similar work in a different state is experiencing frictional unemployment.
• Printers laid off due to a decline in demand for printed materials as businesses switch to online advertising are facing structural unemployment.
• Factory workers laid off as plants relocate to Mexico and Ireland also reflect structural unemployment, due to changes in the location of production.

As for the unemployment rate, its increase is not necessarily bad in all cases. If the unemployment rate goes up due to more people becoming encouraged to look for work or due to transient factors, this is not inherently negative for a nation.