3.3.2 - Macroeconomic Objectives - Unemployment

Question 1

Define unemployment

Answer 1

Unemployment is the count of jobless people in a country who are seeking work but who do not have a job.

Question 2

Define the labour force

Answer 2

The labour force is made up of people in work and people who are unemployed.

Question 3

People who are of working age but are not in the labour force.

Answer 3

• Homemakers
• Carers
• Students
• Early retired
• Discouraged workers

Question 4

List the 3 forms of underemployment/hidden unemployment

Answer 4

• Part-time work
• Low marginal product
• Over-qualification

Question 5

Define the claimant-count

Answer 5

The number of people who are claiming unemployment benefits in a country.

This measure underestimates the number of unemployed because many unemployed people do not claim benefits.

Question 6

What is the international labour force survey (ILO)

Answer 6

The ILO measure of unemployment is a survey of households to establish how many people are unemployed.

Question 7

List the two causes of unemployment

Answer 7

• Frictional unemployment
• Structural unemployment

Question 8

List three types of unemployment

Answer 8

• Seasonal unemployment
• Regional unemployment
• Natural rate of unemployment

Question 9

Show forgone output on a diagram

Answer 9

Question 10

List the 5 affects on the welfare of the unemployed.

Answer 10

• Loss of income
• Increased poverty
• Increased debt
• Negative impact on mental and physical health
• Loss of skills

Question 11

List the negative externalities of unemployment.

Answer 11

Increases social problems in terms of:
- Crime
- Drug use
- Social unrest

Question 12

List the affects unemployment has on government finance

Answer 12

Rising unemployment can increase the government’s budget deficit.

Unemployed workers pay less taxes which reduces government income and the benefits paid to unemployed workers increase government spending.

This is made worse when there is demand deficient unemployment in a recession when government borrowing is already rising.

Question 13

Impact on businesses

Answer 13

High cyclical unemployment or high regional unemployment will reduce demand in many markets and lead to falling sales for firms. This is likely to lead to some business failure and more unemployment.

Question 14

List 4 positive consequences

Answer 14

• There are more workers in the labour market to choose from which makes it easier for employers to find new workers.
• There is less pressure on wages to rise which reduces business costs and can reduce inflation.
• Workers who are concerned about unemployment may work harder and be easier to manage by employers.
• Some people might use a period of unemployment to redirect their lives and find future work that is more fulfilling for them.