Some policymakers have called an end to unemployment insuran

Some policymakers have called an end to unemployment insurance, a transfer payment If done you would expect to see a reduction in

A) Both structural unemployment rate and natural rate of unemployment

B) Structural unemployment but not natural rate of unemployment

C) Both frictional unemploymentand natural rate of unemployment

D) Frictional unemployment but not natural rate of unemployment

Solution

Unemployment insurance / allowance is a transfer payment made by the government to the unemployed till the time they do not find employment.

It has been argued that one of the greatest drawbacks of unemployment insurance is that it leads to people not search for jobs with great enthusiasm as they should.

An end to the unemployment insurance would thus lead to a reduction in not only the structural rate of unemployment ( which occurs due to coming up of new technology, etc.) but also the natural rate of unemployemnt as people will now be more willing to learn the new technology and find employment.

Ans. (a)