The business cycle fluctuations cause frictional unemployment in the economy, and this unemployment can be eliminated by providing more job networks.

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The statement presents a claim about the relationship between business cycle fluctuations and frictional unemployment, and whether increasing job networks can eliminate that unemployment.
Option True: If we interpret the claim as 'business cycle fluctuations cause frictional unemployment and more job networks will eliminate it,' this is problematic. Frictional unemployment arises from the normal process of job searching and matching workers with jobs, including time taken to transition between jobs or enter the workforce. It is not primarily driven by the fluctuations of the business cycle, which generate cyclical unemployment when aggregate demand falls. While better job networks can reduce search time and improve matching, they do not eliminate frictional unemployment entirely, because there is always some delay between becoming unemployed and finding a suitable job, plus individuals may exit the labor force, or require retraining for new roles. Thus the assertion overstates the impact of networks and misattributes the main cause of frictional unemployment to business cycle dynamics.
Option False: This option aligns with standard macroeconomic theory. Frictional unemployment is caused by normal labor market dynamics—transitions between jobs, search time, and imperfect information—rather than being caused by short-term fluctuations in the business cycle. While networks and labor market information can help reduce the duration of frictional unemployment by matching workers with openings more quickly, they do not completely eliminate it, nor do they tie frictional unemployment directly to business cycle fluctuations. Therefore the claim that the business cycle fluctuations cause frictional unemployment and that it can be eliminated by more job networks is inaccurate, representing an overgeneralization about unemployment types.
In summary, the assertion that business cycle fluctuations are the sole cause of frictional unemployment and that enhanced job networks could fully erase it conflates different unemployment concepts and overstates the effectiveness of networks in eradicating frictional unemployment. The more nuanced view recognizes frictional unemployment as a natural feature of job search processes, only partially mitigated by better information and networks, while cyclical unemployment is tied to demand deficiencies during business cycles.

MCD2090 Macroeconomics - Trimester 3 - 2025

The business cycle fluctuations cause frictional unemployment in the economy, and this unemployment can be eliminated by providing more job networks.

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