Question

Suppose that consumers decide to ride buses more often and own fewer cars. Bus companies hire more drivers, while automobile companies lay off workers. The unemployment this creates is an example of:

A) frictional unemployment created by sectoral shifts.
B) frictional unemployment created by efficiency wages.
C) structural unemployment created by efficiency wages.
D) structural unemployment created by sectoral shifts.

Answer 1

Answer: frictional unemployment created by sectoral shifts.

Step-by-step explanation:

Frictional unemployment is the unemployment that exists in any economy as a result of people moving from one job to another. Frictional unemployment also called search unemployment as it is time that is spent between jobs when a worker is transferring from one job to another or searching for a job.

The sectoral shifts of labor demand across on the industries will lead to a flow of labor from the declining sector to an expanding sector which is why the bus companies will hire more drivers. This adjustment of labor to the new patterns of labor demand are typically slow and involves frictional unemployment.