Final answer:
To address the situation where labour demand exceeds labour supply, hiring temporary workers is a viable solution. This approach mitigates the risks associated with laying off and rehiring staff during uncertain economic times and also plays a role in reducing frictional unemployment.
Step-by-step explanation:
When labour demand exceeds labour supply, a potential solution is A. Hiring temporary workers. During a recession's onset, firms may hesitate to lay off workers due to the risk of losing them, potentially having to rehire and train new employees if the downturn is temporary. Typically, firms will retain their workforce initially and may employ overtime work until the market's recovery is certain. As stated, the growth of the temporary worker industry has been instrumental in reducing the natural rate of unemployment from the early 1980s to the early 2000s. Temporary agencies provide valuable work opportunities while serving as a clearinghouse for job seekers and employers, often acting as a springboard to permanent employment. This has helped to alleviate frictional unemployment and has become a key part of modern labor market dynamics.
In addition, advancements such as Internet job searches and social networking platforms like LinkedIn have revolutionized how job seekers connect with potential employers, further easing the matching process between labor demand and supply. The overall quantity of labor within an economy can increase by either expanding the workforce or enhancing the human capital of existing workers, allowing for a more adaptable and responsive labor market.