Question:

What is the effect of permanently increasing the number of weeks for which eligible workers can receive Employ

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What is the effect of permanently increasing the number of weeks for which eligible workers can receive Employment Insurance benefits.?

a-shifts the LRAS to the right

b-shifts the LRAS to the left

c-leave the LARS unchanged

Where LRAS is long-run aggregate supply curve.

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  1. c-leave the LARS unchanged

    Higher employment insurace benefits imply the relative value of not working has increased but over tiime this factor will become weak as people generally earns more while working.


  2. c - unchanged.

    In the short run, aggregate supply would decrease as it became more beneficial to not work.  However wages would eventually adjust which would entice more people back into the labor market and the net change is theoretically zero.

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