Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What is frictional unemployment?

1. Individuals who are unemployed due to economic downturns

2. People who are temporarily unemployed while transitioning between jobs

3. A result of technological advancements eliminating jobs

4. Workers laid off due to company restructuring

The correct answer is: People who are temporarily unemployed while transitioning between jobs

Frictional unemployment refers to the temporary period of unemployment experienced by individuals who are in between jobs or are searching for their next position. It occurs as people transition from one job to another, which can involve some time spent looking for the right opportunity that matches their skills, preferences, and desired job characteristics. This type of unemployment is generally seen as a normal and even healthy part of a dynamic labor market, as it reflects the voluntary choice of workers to pursue more suitable or fulfilling employment rather than being unemployed due to more systemic issues in the economy. The other options describe forms of unemployment that are not frictional. Economic downturns create cyclical unemployment, which arises from factors affecting the overall economy rather than individual choices. Technological advancements leading to job elimination reflect structural unemployment, which occurs when the skills of the workforce do not match the needs of the evolving job market. Lastly, layoffs due to company restructuring result in a different kind of unemployment, often related to market forces or organizational changes rather than the workers' individual decisions regarding employment transitions.