Question

If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor and employers increasingly used efficiency wages, it would ___ structural unemployment and ____ the natural rate of unemployment:

Answer 1

The options for this question are the following:

A. Increase; Increase.

B. Increase; Not change.

C. Not change, Increase.

D. Do none of the above

The correct answer is A. Increase; Increase.

Step-by-step explanation:

The natural unemployment rate is one that represents a level of unemployment that cannot be reduced and is part of what is considered normal in an economy. This level usually ranges between 2% and 5% and is part of the frictional unemployment of the population.

The natural unemployment rate exists, in part, because some workers quit their jobs, ceasing to earn income for a time, for various reasons. These may be, for example, the aspiration for a better professional opportunity or the distance to the workplace.