Chapter 10

Question 1

Unemployment

Answer 1

Unemployment
Labour force
Participation rate
Unemployment rate

Question 2

Unemployment

Answer 2

People in the labour force who are willing and able to work but cannot
find a job.

Question 3

Labour force

Answer 3

People who want a job. They are in work or are actively looking for work
and able to start work (looking for work, working, ready to start work and want to work). Both
the employed and the unemployed are in the labour force.

Question 4

Participation rate

Answer 4

Proportion of people of working age who are in the labour force.

Question 5

Unemployment rate

Answer 5

Proportion of the labour force without a job.

Question 6

The unemployment rate is the percentage of people in the labour force without work (FORMULA)

Answer 6

(unemployed/labour force) x 100
The level of unemployment is the number of people without work.

Question 7

Participation rate formula

Answer 7

(Labour force/population 15+ ) x 100

Question 8

ABS Criteria
To be officially unemployed, and therefore entitled to benefits, people have to prove they are:

Answer 8

Doing less than 1 hour paid employment per week
Actively looking for work (keeping a job search diary)
Able to start work
Wanting to work

Question 9

People not in the labour force includes:

Answer 9

People under the age of 15
Retired individuals
Full-time students
People who perform home duties
Those who are ‘chilling out’
Individuals in the armed forces

Question 10

Measurement issues

Answer 10

Official figures dont include hidden and disguised employed
Cruising people, not looking for a job but get benefits
Overtime, insecurity, earning differentials, uneven distribution of employment

Question 11

A fall in the participation rate may lead to a lower unemployment rate

Answer 11

a rise in the participation
rate may lead to more employment and a rise in unemployment rate at the same time.

Question 12

Unemployment Rate, Employment and the Participation Rate: A fall in the participation rate will, other things being equal,

Answer 12

cut the unemployment rate.

Question 13

Unemployment Rate, Employment and the Participation Rate: A cut in the unemployment rate might encourage

Answer 13

more workers to join the labour force

Question 14

Unemployment Rate, Employment and the Participation Rate: Employment and the unemployment rate can both rise if

Answer 14

participation rate rises

Question 15

Causes and types

Answer 15

Structural, frictional, cyclical

Question 16

Structural defintion

Answer 16

Change in pattern of demand, immobility in labour force. Includes technological,
seasonal

Question 17

Frictional definition

Answer 17

Churning. Temporary unemployment as people move from job to job.

Question 18

Cyclical definition

Answer 18

Too low level of aggregate demand to provide work for labour force

Question 19

Demand deficiency unemployment occurs when output is

Answer 19

below full capacity (or where AD is below the level needed to get output to capacity)

Question 20

Structural unemployment arises from the

Answer 20

mismatch of skills and job opportunities as the
pattern of demand and output changes.

Question 21

Frictional unemployment

Answer 21

People change jobs but are temporarily out of work in-between jobs. They experience short spells of unemployment as they hop between jobs in a dynamic society.

Question 22

Underemployment

Answer 22

When people are employed but are willing to work more hours. For example, if someone is
working 10 hours a week but would be willing to work 40 hours a week.

Question 23

The natural rate of unemployment

Answer 23

It is the level of
unemployment when the labour market is in equilibrium.
At the natural rate cyclical unemployment is zero. The natural rate, therefore, is made up of
the other types of unemployment.

Question 24

NAIRU

Answer 24

The non-accelerating inflation rate of unemployment

Question 25

With over-full employment wages will start to rise

Answer 25

(there will be shortages of people with
particular skills).
As unemployment falls below the natural rate wage inflation picks up, and the economy is clearly below the NAIRU rate.