In the Case in Point Entitled "Might Increased Structural Unemployment

question 6

Multiple Choice

In the Case in Point entitled "Might Increased Structural Unemployment Explain the 'Jobless Recovery' Following the 2001 Recession," economists Erica Goshen and Simon Potter note that when a layoff is temporary, the employer "suspends" the job, due to slack demand, and the employee expects to be recalled once demand picks up. With a permanent layoff, the employer eliminates the job. Which of the following statements is consistent with their observations?

• A) Both temporary and permanent layoffs create cyclical unemployment.
• B) Both temporary and permanent layoffs create structural unemployment.
• C) Temporary layoffs create structural unemployment while permanent layoffs create cyclical unemployment.
• D) Temporary layoffs create cyclical unemployment while permanent layoffs create structural unemployment.

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Definitions:

Break-even Chart

A graphical representation that shows when a business's costs will be exactly covered by its income.

Variable Costs

Costs that vary directly with the level of production or sales, such as materials and labor costs.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Variable Costs

Expenses that change in proportion to the activity of a business, such as the cost of raw materials or production volume.