John S asked in Social ScienceEconomics · 1 decade ago

MACROECEONMICS please help?

Suppose that the government reduces the time during which an unemployed worker can receive benefits. Explain how this action by the government will affect the natural rate of unemployment.

2 Answers

Relevance
  • Anonymous
    1 decade ago
    Favorite Answer

    The un-employed worker still needs money to purchase essential goods. Ie - food, clothing etc.

    If the government cuts down on the time it will lead to the unemployed finding jobs quicker.(assuming that there are jobs to get)

  • 1 decade ago

    u=µYd unemployement related to net income, after taxes

    u`=µ`Yd`

    Yd=Y-tY=(1-t)Y

    Yd`=(1-t)Y`

    Yd-Yd`=(1-t)(Y-Y`)

    Plugging in the first two equations considering µ=µ`

    (u/µ)-(u`/µ`)=(1-t)(Y-Y`)

    u-u`=µ(1-t)(Y-Y`) change in the natural rate of unemployment

Still have questions? Get your answers by asking now.