The Unemployment That Occurs When People First Enter the Labor

question 105

Multiple Choice

The unemployment that occurs when people first enter the labor force or when they are in the process of changing jobs, is called:

• A)frictional unemployment.
• B)cyclical unemployment.
• C)natural unemployment.
• D)structural unemployment.

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Definitions:

Adverse Selection

The case in which an individual knows more about the way things are than other people do. Adverse selection problems can lead to market problems: private information leads buyers to expect hidden problems in items offered for sale, leading to low prices and the best items being kept off the market.

Moral Hazard

The situation that can exist when an individual knows more about his or her own actions than other people do. This leads to a distortion of incentives to take care or to expend effort when someone else bears the costs of the lack of care or effort.

Risk Aversion

The tendency to prefer certainty over uncertainty, avoiding risk in decision-making or preferring safer investments.

Insurance

A means of protection from financial loss, characterized by the transfer of risk from one entity to another in exchange for payment.