Question

Government policies can help to reduce the levels of the natural unemployment rate, but they can also help to increase it. Which of these policies can cause an increase in the level of the natural unemployment rate

Answer 1

I

Improve labour market flexibility.

Step-by-step explanation:

Natural unemployment rate, generally deals with both structural and frictional unemployment, that always occur when the economy is constantly increasing or booming, and the supply of labour and resources are in equilibrium.

One of the many government policies to reduce unemployment is Improving Labor market flexibility, and while it is believed that improving labour market flexibility, that is, eliminating long working hours and making it easier to hire and fire workers may give rooms to more job creation. However, it may boomerang, where by the higher flexibility of the labor market could only cause an increase in temporary employment and not permanent employment, and there by, resulting to greater job insecurity, which in turn will leads back to natural unemployment, thus increasing the rates of natural unemployment rather than decrease it as intended.