Question

What do you understand by "Frictional Unemployment"?

Hint:

Remember that frictional unemployment is about the "friction" or time lag in the job-search process. It's the unemployment that exists while people are "in transit" between jobs.

Answer 1

Step 1: Understanding the Concept:
The question asks for the definition of frictional unemployment, which is one of the types of natural unemployment that exists even in a healthy economy.

Step 2: Detailed Explanation:
Frictional unemployment is the temporary unemployment that arises when people are in the process of moving from one job to another. It occurs because the labor market is not perfect, and it takes time for workers to search for and find new jobs that match their skills and preferences.
This type of unemployment includes: \begin{itemize} \item People who have voluntarily left their jobs in search of better opportunities. \item New graduates entering the labor market for the first time and searching for their first job. \item Individuals who are re-entering the workforce after a period of absence (e.g., after raising children). \end{itemize} Frictional unemployment is considered short-term and is a natural part of a dynamic and changing economy. It is not necessarily a negative sign, as it indicates labor mobility.

Step 3: Final Answer:
Frictional unemployment is the short-term unemployment that occurs when workers are between jobs or are searching for their first job. It is a natural outcome of the time it takes to match workers with available jobs.