Consider Two Countries: Flexiland and Stuckland

question 18

Essay

Consider two countries: Flexiland and Stuckland. The labor force in each country consists of 100,000 workers. In Flexiland a different 500 workers are unemployed each month. In Stuckland the same 500 workers are unemployed for the entire year. Compare and contrast the unemployment situation in the two countries by explaining:
a. the unemployment rate,
b. the number of spells of unemployment,
c. the average duration of each unemployment spell, and
d. whether the unemployment is more likely to be frictional or structural.

---

Definitions:

Foreign Currency

Currency of another country, used to conduct international transactions or investments.

Forward Market

A marketplace for the exchange of financial instruments or commodities for delivery in the future at prices agreed upon today.

Spot Market

A public financial market in which financial instruments or commodities are traded for immediate delivery.

Communications Technology

The branch of technology that deals with the transmission of information through digital or analog means.