Chapter 7 - Unemployment Flashcards
After GDP, what is considered the second most important indicator of economic health?
The unemployment rate
Does the unemployment rate include people who aren’t looking for a job?
No
What occurs when a worker who is not currently employed is searching for a job without success?
Unemployment
What do we use to monitor the level of unemployment in an economy?
Unemployment rate
What is the percentage of the labor force that is unemployed?
Unemployment rate (u)
What are the three types of unemployment?
- Structural
- Frictional
- Cyclical
Why are structural unemployment and frictional unemployment called “natural unemployment?”
They occur when the economy is healthy and growing
Is it practical to have zero unemployment?
No
Which unemployment is caused by changes in the industrial makeup of the economy?
Structural unemployment
Who came up with the term “creative destruction?”
Joseph Schumpeter
What is the term used to describe the process of economic evolution?
Creative destruction
What occurs when the introduction of new products and technologies leads to the end of other industries and jobs?
Creative destruction
What does the creative destruction process lead to?
Structural unemployment
In a dynamic economy is job turnover normal?
Yes
How can structural unemployment be reduced?
Workers must often retrain, relocate, or change their expectations in some way
What is caused by delays in matching available jobs and workers?
Frictional unemployment
What two types of unemployment cause natural unemployment?
- Structural
2. Frictional
What are two causes of change in frictional unemployment?
- Information availability
2. Government policies
What is a government program that reduces the hardship of joblessness by guaranteeing that unemployed workers receive a percentage of their former income while they are unemployed?
Unemployment insurance
What is the RealGDP of the base year?
The NominalGDP
What is cyclical unemployment caused by?
Recessions
Which unemployment is caused by the ups and downs of the economy?
Cyclical unemployment
What is the root cause of cyclical unemployment?
An unhealthy economy
During a healthy economy is cyclical unemployment present?
No
What is the typical rate of unemployment in an healthy economy?
Natural rate of unemployment (u*)
What is the output level produced in an economy when there is no cyclical unemployment?
Full employment output (Y*)
When cyclical unemployment is 0 does that mean our economy is healthy, we are having a recession, or we are having an expansion?
Our economy is healthy
When cyclical unemployment is positive does that mean our economy is healthy, we are having a recession, or we are having an expansion?
We are having a recession
When cyclical unemployment is negative does that mean our economy is healthy, we are having a recession, or we are having an expansion?
We are having an expansion
In each of the following situations, is the unemployment that occurs a result of cyclical, frictional, or structural changes?
a. Workers in a high-end restaurant are laid off when the establishment experiences a decline in demand during a recession.
b. A group of automobile workers lose their jobs as a result of a permanent reduction in the demand for automobiles.
c. A new college graduate takes three months to find his first job.
- Cyclical
- Structural
- Frictional
How do we measure the unemployment rate?
(# unemployed/ labor force) x 100
How do we calculate to labor force?
You take the # of employed + the # of unemployed
Is the military apart of the labor force?
No
Who are people who want a job but get discouraged and give up looking for work?
Discouraged workers
Are discouraged workers included in the labor force?
No
Who are part-time workers who want a full-time job?
Underemployed workers
How do we collect the unemployment data?
Through the household survey
What is the portion of the population that is in the labor force called?
The labor force participation rate
How do you find the labor force participation rate?
(Lab. for./pop.) x 100
The following data is from Germany in 2010:
Working-age population = 70,856,000
Labor force = 41,189,000
Employed = 38,209,000
Question: Using the data, how would you compute the number of unemployed workers, the unemployment rate, and the labor force participation rate for Germany in 2010?
- 2,980,000
- 7.2
- 58.1%
