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Macro Economics > 2.1 Pt2 (2.1.3-2.1.4) > Flashcards

2.1 Pt2 (2.1.3-2.1.4) Flashcards

1
Q

What is unemployment ?

A
  • the no. of people w/o a job, have been actively seeking for work in the past four weeks and are available to start work in the next two weeks
  • a measure of how well the economy is performing
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2
Q

What is meant by inactive ?

A
  • people of working age who are not trying to get a job eg. students, carers, disabled, early retired
  • not part of the labour force
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3
Q

What is the labour force ?

A
  • the total no. of all active population, both employed and unemployed
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4
Q

What is the unemployment rate ?

A
  • the no. of unemployed as a % of the labour force
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5
Q

What are the two measure of unemployment ?

A
  1. The Labour Survey: international agreed measure of unemployment
    • asks around 60,000 households whether they classify as employed, unemployed or economically inactive
  2. The Claimant Count:
    • counts the no. of people seeking Job Seekers Allowance (JSA)
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6
Q

What are the positives and negatives of the labour survey ?

A

🔔 known to overestimate true unemployment by including people looking for part time work + sampling errors

✅ allows for comparisons between countries (as use same method)
✅ allows for comparisons of diff. time periods
✅ provides a rich set of data
❌ only asks 60,000 so will be sampling errors ➡️ less accurate
❌ time consuming & expensive
❌ only conducted quarterly so may not pick up changes in labour market very quickly

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7
Q

What are the positives and negatives of the claimant count ?

A

🔔 known to underestimate actual employment as not everyone claims unemployment benefits

✅ should show exact no. of people who claim unemployment benefits ➡️ accurate
✅ inexpensive & easy to classify if someone is actively seeking work
✅ easy to compare local/regional differences
✅ data produced monthly
❌ not all unemployed people will claim JSA ➡️ too proud to claim
❌ not all unemployed people meet criteria for collecting unemployment benefits (eg. have savings, partner who works ect)

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8
Q

What is under employment ?

A

🔔 workers wanting to work more

  • looking for extra job or a new job to replace current job
  • wanting more hours at their current job
  • under utilised in terms of their ability/qualifications/experiences
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9
Q

What are the 5 causes of unemployment ?

A
  • structural
  • frictional
  • seasonal
  • cyclical/ demand deficiency
  • real wage inflexibility
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10
Q

What is meant by structural unemployment ?

A
  • caused by changes in the structure of the economy meaning skills of workers no longer match the available jobs
  • ‘lack of suitable skills for available jobs’ as a result of de-industrialisation
  • linked to a lack of labour immobility ➡️ people lack skills to move between jobs/sectors
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11
Q

What is meant by frictional unemployment ?

A
  • ‘transactional unemployment’
  • due to people moving between jobs & affects new entrants to the labour market eg. students
  • will always be some in the labour market
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12
Q

What is meant by seasonal unemployment ?

A
  • occurs when seasonal workers are out of a job because of the time of year eg. fruit pickers in summer, retail jobs pre-christmas,
  • tourism, retail, agriculture
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13
Q

What is meant by cyclical/demand deficient unemployment ?

A
  • caused by weak AD in the economy, reducing the demand for labour
  • can rise quickly in a recession
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14
Q

What is real wage unemployment ?

A
  • happens when wages are too high for S&D conditions ➡️ causes supply of labour to be greater than the demand of labour

eg. minimum wages are too high (employers unable to afford to pay as many employees)

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15
Q

What is meant by economic inactivity ?

A
  • the section of the working age population which is not in employment or not actively seeking jobs eg. uni students, early retired, disabled
  • not part of the working pop/labour force
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16
Q

What are the costs of unemployment to businesses ?

A
  • fall in demand for goods/services
  • decrease in sales + profits
17
Q

What are the costs of unemployment to the govt ?

A
  • increased spending on unemployment benefits
  • fall in revenue from income tax & consumer taxes
  • fall in revenue from corporation tax
  • may lead to increase in govt borrowing (deficit)
18
Q

What are the costs of unemployment to the economy ?

A
  • lost output (real GDP) from people being out of work
  • some long term unemployed may leave the labour force permanently (fall in potential GDP)
  • increase in inequality + rise in relative poverty
  • slower rates of economic growth
19
Q

What are the costs of unemployment socially ?

A
  • loss of income
  • fall in living standards
  • increased health issues (stress, social exclusion)
  • loss of marketable skills (human capital) + motivation ➡️ longer duration the lower the chance of becoming employed (less attractive to employers)
20
Q

What policies are there to reduce unemployment ?

A
  • micro stimulus policies:
    . low interest rates + improve credit supply to businesses
    . deprecation in exchange rates (help exports)
    . infrastructure investment projects (fiscal policy)
  • cut costs of employing extra workers
  • competitiveness policies:decrease corporation tax, tax incentives, enterprise policies
  • reducing occupational immobility: better funding for training, teaching new skills etc
  • improving geographical mobility increase house building, lower property prices, improve transport etc
  • stimulate stronger work incentives: increase min wage, welfare reforms, increase tax free allowances
21
Q

What does the impact of migration on the labour market depend on ?

A

depends on:
- migrants skills
- skills of existing ‘native’ workers
- the characteristics of the ‘host economy’

22
Q

What is the impact of migration on the labour market ?

A

net positive immigration should ↑ labour supply in an economy ➡️ in a free market should cause for wages to fall HOWEVER an increase in pop will result in an increase in demand for goods/services ➡️ can create jobs + keep wages stable

  • if migrant workers are ‘substitutes’ for native workers: ↑ competition for jobs causing wages to fall (more likely in low-skilled jobs)
  • if they are ‘complements’ for native workers: maybe cause wage ↑ (especially for mid-high skilled workers)
23
Q

What is the balance of payments ?

A
  • a record of all financial transactions in one country with other nations
  • main measure of a country’s external trade performance
24
Q

What are inflows and outflows of currency ?

A
  • inflows of currency: counted as a positive entry eg. exported goods
  • outflows of currency: counted as a negative entry eg. imported goods
25
Q

What is the current account of the BOP ?

A
  • measures the difference between money + credit going in and out of an economy (via exports, imports and income paid on assets both home and abroad)
26
Q

What are the four main parts of the current account ?

A
  • trade balance in goods: (visible trade) manufactured goods, raw materials, energy products, technology ➡️ UK has deficit
  • trade balance in services: (invisible goods) banking, insurance, tourism, health, research ➡️ UK has surplus
  • net primary income: (from overseas assets) profits + interests from investments in other countries
  • net secondary income: overseas aid, private money transfers eg. from migrants
27
Q

What is a deficit and a surplus of the current account ?

A
  • a deficit: more money is leaving than entering the country (imports > exports)
  • a surplus: more money entering the economy than leaving (exports > imports)
28
Q

What are the causes of a current account deficit ?

A
  • poor pricing & non pricing competitiveness (higher inflation than other countries, low levels of investment)
  • high exchange rate = ↓ in exports
  • recession in one or more major trade partner countries
  • volatile global prices eg. commodities
  • booming domestic economy (need to import more raw materials + households buy more imports as have more income)
29
Q

What is the capital account of the BOP ?

A
  • investment in other countries
  • banking flows of money
  • govt debt sold abroad
30
Q

What are some global trade patterns ?

A
  • 1/4 of all outputs produced is exported
  • production chains are becoming more complex ie. final goods are made in more than one country
  • bilateral trade is becoming increasingly more important eg. if country A trades to B, B is more likely to trade with A
  • much more trade with poor countries
  • China remains economy with largest value of trade

Macro Economics (13 decks)

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