University of Central Florida (UCF) ECO3203 Intermediate Macroeconomics Practice Exam 1

An increase in structural unemployment occurs when there is a persistent mismatch between the skills that workers possess and the skills that are needed for available jobs in the economy. This can happen due to various reasons, such as technological advancements, shifts in consumer preferences, or changes in the structure of the economy itself that make certain skills obsolete or less in demand.

When a skills mismatch exists, even if jobs are available, individuals may not qualify for these positions because they lack the necessary education or training. This situation can lead to higher levels of structural unemployment since it is not merely a lack of jobs, but rather a fundamental issue of compatibility between the workforce's skills and job requirements.

In contrast, economic growth and high levels of consumer spending typically create more job opportunities, which would likely reduce unemployment. Increased automation can lead to job loss in specific sectors, but it doesn't directly lead to structural unemployment unless it creates a significant skills gap. Therefore, a skills mismatch is the primary factor leading to an increase in structural unemployment.