Question

Unemployment insurance

a. increases search effort which decreases unemployment.
b. reduces search effort which lowers unemployment.
c. increases search effort which raises unemployment.
d. reduces search effort which raises unemployment.

Answer 1

Answer: The correct answer is "d. reduces search effort which raises unemployment.".

Explanation: Unemployment insurance reduces search effort which raises unemployment because the unemployed who receive this unemployment insurance, lose motivation to look for work because they are calm knowing that they will receive unemployment insurance, which causes unemployment to increase.