Project-2 - Course Project- Part 2 Business Economics GM...

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“Course Project- Part 2” Business Economics GM 545 Spring Session B, 2011 Project Team Members: Nuttarinee Phathiphairoh (nuttarinee.9@gmail.com ) Palsang Gurung (palsang_g@hotmail.com ) Manika Maharjan (manika7@hotmail.com ) (PROJECT TOPICS APPROVED BY PROFESSOR)
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Chapter 16, Question 5: Why is frictional unemployment important to have in any economy? Frictional unemployment is the unemployment that results from people switching jobs or entering the labor market. The job search takes time, so this type of unemployment is inevitable. Frictional unemployment is temporary because the jobs and workers are there; they just have to find each other. Frictional unemployment occurs naturally in even the highest performing economies. Frictional unemployment exists because both jobs and workers are heterogeneous , and a mismatch can result between the characteristics of supply and demand. Such a mismatch can be related to skills, payment, work time, location, attitude, taste, and a multitude of other factors. New entrants (such as graduating students) and re-entrants (such as former homemakers) can also suffer a spell of frictional unemployment. Workers as well as employers accept a certain level of imperfection, risk or compromise, but usually not right away; they will invest some time and effort to find a better match. This is in fact beneficial to the economy since it results in a better allocation of resources. However, if the search takes too long and mismatches are too frequent, the economy suffers, since some work will not get done. Therefore, governments will seek ways to reduce unnecessary frictional unemployment. Frictional unemployment is often viewed as beneficial to workers and the economy. Frictional unemployment is natural for our economy and, indeed, necessary and beneficial because of the following reasons: 1. People need time to search for new jobs, and employers need time to interview and evaluate potential new employees. Frictional unemployment is inevitable and natural for any economy as people change jobs and businesses open and close. The existence of frictional unemployment and the closely related structural employment mean that the unemployment
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rate in a nation will never drop all the way to zero. People moving from one job to the next are said to be frictionally unemployed. Any time someone is between jobs, this is considered frictional unemployment. Some common examples include recent college graduates seeking their first jobs, craftspeople who are laid off between projects, and people who quit their jobs to relocate or to seek out better employment. These individuals are usually prepared for their brief periods of unemployment, and they do not stay unemployed for very long as long as the economy and the job market are table. Employment agencies, classified ads, the internet all reduce the time is takes to match job offers to job seekers but some frictional employment will always exist. 2.
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This note was uploaded on 07/28/2011 for the course GM 545 taught by Professor - during the Spring '10 term at Keller Graduate School of Management.

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Project-2 - Course Project- Part 2 Business Economics GM...

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