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Spiderland is a developing economy. This table shows selected labor statistics during the period 2010-2020: The estimated natural rate of unemployment Employment level -

Spiderland is a developing economy. This table shows selected labor statistics during the period 2010-2020: The estimated natural rate of unemployment Employment level - Primary sector - Manufacturing sector - Service sector - Overall Labor Force Average duration of unemployment 2010 4% 500,000 800,000 50,000 1,350,000 1,400,000 2 weeks 2020 8% 400,000 1,100,000 60,000 1,560,000 1,700,000 25 weeks a. How did the natural rate of unemployment in Spiderland change during the period? Which ONE of the following is the more likely reason for such a change? i. A drastic increase in the statutory minimum wage rate: ii. A sectoral shift of the economy. Explain your answer using the figures from the above table. (Hint: Calculation is not a must. More important, interpret and compare the given figures reasonably.) (12 marks) b. A legislator suggests increasing the government spending on public services to reduce the natural rate of unemployment in Spiderland. Explain whether this suggestion helps reduce the natural rate of unemployment. (4 marks)

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