Answer to Question #201661 in Macroeconomics for Akhona Klanisi

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

Higher unemployment is also a result of lower demand. In brief, oil price shocks can raise the marginal cost of production in numerous industries, resulting in lower output and more unemployment. The impact of oil price shocks on the unemployment rate can be determined by the rate at which people shift from one job to another within a short period. Industries depend on oil products for energy thus changes in oil prices affects the operation.