Suppose the world price of cotton. falls substantially. The demand for labor among cotton-producing firms In Texas wall _ .The demand for labor among textile-producing firms in South Carolina, for which cotton Is an input, will . The temporary unemployment resulting from such sectoral shifts in the economy is best described as ____ unemployment.
Suppose the government wants to reduce this type of unemployment. When of the following policies would help achieve this goal? Check all that apply.
a) Extending the number of weeks for which unemployed workers are eligible for unemployment insurance benefits from the government
b) Establishing government employment agencies to connect unemployed workers to job vacancies
c) Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks

A reduction in the price of cotton would cause the quantity supplied of cotton to reduce. To produce fewer cotton, the firms would need lesser workers. As a result, the demand for labor by cotton producing firms will decrease.

As cotton becomes cheaper, the cost of production for the textile firms that use cotton as inputs will decrease. This decrease in cost will promote the firms to increase production. To produce more the firms will need more workers. So the demand for labor by these firms will increase.

There will be a short term unemployment because of this as workers will shift from one industry to the other. This unemployment created when workers move from one job to the other is called frictional unemployment.

The government can reduce this type of unemployment by offering cash bonus who can find jobs quickly. The government can also reduce unemployment by connecting workers to job vacancies.