Costs of Unemployment

Question 1

a high rate of unemployment carries a cost to an economy and its participants. some of these costs include:

Answer 1

• decrease in mental health
• increase in government assistance (housing, food, cash payments)
• a decrease in production which leads to a decrease in GDP (GDP gap)

Question 2

note

Answer 2

• the unemployment rate and GDP are inversely proportional

- for every 1% increase in unemployment, there is a 2% decrease in GDP, resulting in a GDP “gap”

Question 3

GDP gap

Answer 3

GDP Gap % - % unemployment x 2

Question 4

when there is high unemployment, which of the following occurs in society

Answer 4

greater reliance on govt. assistance

Question 5

production possibilities frontier curve can be used to illustrate production levels. what does it mean to operate beneath the PPF curve

Answer 5

falling production & increase in inefficiency

Question 6

which of the following is true when unemployment is high, and it negatively impacts the government

Answer 6

welfare increases

Question 7

unemployment rate if the GDP gap is 13.5%

Answer 7

6.75%

Question 8

high unemployment

Answer 8

economic depression