Chapter 7, Problem 1QQ

To determine

The goal of unemployment insurance system

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The goal of unemployment insurance system is to reduce the uncertainty of the workers about their income. This is because under this system, the unemployed workers can collect a part of their wages for a certain period after losing their jobs. Thus, Option (d) is correct.

Option (a):

Unemployment insurance system reduces the rate of job finding, as the system softens the hardship of unemployment. Therefore, the beneficiaries of this system are less pressed to find a new job and turn down unattractive jobs. However, this is an effect of the system and not the goal. Thus, Option (a) is incorrect.

Option (b):

Unemployment insurance system increases the rate of job separation as unemployed are partially protected by this insurance, therefore, they are less like to look for stable jobs with job security. Thus, Option (b) is incorrect.

Option (c):

Unemployment insurance system increases the frictional unemployment as the system softens the hardship of unemployment. Thus, Option (c) is incorrect.

Economics Concept Introduction

Unemployment: Unemployment is the situation in which the workers are willing to offer their labor force at the prevailing market’s wage rate and are actively searching for the job but are unable to get a job from the market.