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    Question

    Consider the following statements about

    unemployment: 1. Frictional unemployment occurs due to short-term transitions in the labor market. 2. Structural unemployment arises when there is a mismatch between workers' skills and job requirements. 3. Cyclical unemployment increases during economic expansion and decreases during a recession. Which of the above statements are correct?
    A 1 and 2 only Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1 and 3 only Correct Answer Incorrect Answer
    D 1, 2, and 3 Correct Answer Incorrect Answer

    Solution

    Frictional unemployment is temporary and arises from transitions (statement 1). Structural unemployment results from skill mismatches (statement 2). Cyclical unemployment increases during recessions and decreases during expansions (statement 3 is incorrect).

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