3.2 Low unemployment

Question 1

Define employment

Answer 1

When people who are willing and able to work can find a job

Question 2

Define unemployment

Answer 2

When people who are willing and able to work cannot find a job

Question 3

Define claimant count

Answer 3

A measurement of unemployment using the number of people who claimed unemployment-related benefits

Question 4

How do you calculate unemployment rate?

Answer 4

unemployment rate = number of unemployed/workforce X 100

Question 5

What are the types of unemployment?

Answer 5

• Cyclical unemployment
• Frictional unemployment
• Seasonal unemployment
• Structural unemployment

Question 6

Define cyclical unemployment

Answer 6

Workers without employment due to a fall in total demand for goods and services

Question 7

Define frictional unemployment

Answer 7

Workers without employment as they move from one job to another

Question 8

Define seasonal unemployment

Answer 8

Workers without employment due to a decrease in demand at certain times of year

Question 9

Define structural unemployment

Answer 9

Workers without employment due to the decline of an industry

Question 10

What are the consequences of unemployment (for individuals)

Answer 10

• Lower income
• Lower standard of living
• Tax increases (income tax may increase for those employed if a government needs to raise more money to pay increased benefits)

Question 11

What are the consequences of unemployment (for governments)

Answer 11

• Budget deficit (government may spend more than it receives in tax revenue)
• Cycle of increasing unemployment (lower income leads to lower consumption, leads to less total demand, leads to fewer workers needed to make less output, leads to increased unemployment)
• Social problems which may result from unemployment (e.g. increased health problems due to the unemployed having less money to spend on healthy food)

Question 12

What are the consequences of unemployment (for regions)

Answer 12

• Decrease in regional standard of living (a cycle of increasing negative impacts due to high local unemployment e.g. shops closing)

Question 13

Benefits of unemployment

Answer 13

• Decreased inflation (lower wages mean individuals can afford to buy less, so there is less demand for goods, resulting in a lower general price level)
• International competitiveness (workers may have to accept a lower wage rate to get a job, which reduces costs for firms, meaning they can lower prices and be more price competitive against overseas firms)
• Easier to recruit (if there are more workers looking for employment, it is easier for firms to find new workers and expand output)