What is Involuntary unemployment ?

Q.  Involuntary unemployment is
- Published on 03 Oct 16

a. Person is willing to work at the current wage yet is unemployed
b. Person not willing to work at the current wage as it is less than their reservation wage
c. Person doing work inferior to one’s capacity and qualification
d. There is no such term as Involuntary unemployment

ANSWER: Person is willing to work at the current wage yet is unemployed
 
  • Involuntary unemployment occurs when a person is willing to work at the prevailing wage yet is unemployed
  • Involuntary unemployment is distinguished from voluntary unemployment, where workers choose not to work because their reservation wage is higher than the prevailing wage.
  • In an economy with involuntary unemployment there is a surplus of labor at the current real wage.

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