Answer to Question #203992 in Economics of Enterprise for Nomfundo Shandu

Question

As a business economist, critically analyse how changes in the world price of oil affect the amount of frictional unemployment in a country.  

Answer 1

Frictional unemployment occurs as the world price of oil rises because oil-producing firms increase output and employment while other firms, such as those in the auto industry, reduce output and employment. For a period of time until workers have transferred from the auto industry to the oil industry, more frictional unemployment emerges from the sectoral transition from the car industry to oil enterprises.