Employment

Question 1

What is the participation rate

Answer 1

the percentage of the population in work or actively looking for work

Question 2

what is employment

Answer 2

the number of people who are in a job and working inc self employment

Question 3

what is unemployment

Answer 3

a person who is of working age
without a job
available to start within 2 weeks
and has been looking for the past 4 weeks

Question 4

what is the claimant count

Answer 4

the number of people without a job and claiming job seekers allowance

Question 5

what is inactivity

Answer 5

people of working age without a job but not looking for work

Question 6

what is real wage unemployment

Answer 6

a situation where unemployment exists as wages are too high relative to the equilibrium wage rate that would clear the labour market

Question 7

what do classical economists believe about unemployment

Answer 7

that if real wages were allowed to adjust downwards, unemployment would disappear as workers would be willing to work for less.

Question 8

what is cyclical unemployment

Answer 8

workers are unemployed due to low levels of AD in the economy

Question 9

what is seasonal unemployment

Answer 9

workers are temporarily unemployed due to low levels of demand at particular times of the year

Question 10

what is frictional unemployment

Answer 10

workers are temporarily unemployed because even though jobs exist they haven’t found it yet

Question 11

what is structural unemployment

Answer 11

the unemployed do not have the right skills for the jobs available

Question 12

what policy will be a solution to structural unemployment

Answer 12

SUPPLY - provide retraining and education/skills programs

Question 13

what policy will be a solution to cyclical unemployment

Answer 13

increase AD

Question 14

what policy will be a solution to frictional unemployment

Answer 14

provide job centres and online job info

Question 15

what policy will be a solution to seasonal unemployment

Answer 15

encourage a balance of jobs in the area
provide subsidies for hi-tech start ups or help create industrial parks in seaside towns

Question 16

what is cyclical unemployment (long answer)

Answer 16

-due to lack of demand
- in a recession, firms ‘downsize’ making people redundant
- in a recession, there is an increase in spare capacity
- Keynesian economies would use demand side policies to shift AD back out

Question 17

demand side policies to cut unemployment

Answer 17

• fiscal policy: G^ or T(d) -> stimulates growth + AD ^
• monetary policy: interest rates (d) -> encourages consumption and
  investment -> AD^
• depreciating currency: interest rates (d) -> currency depreciates ->
  exports^ imports (d) (expenditure switching)
• reduce national insurance -> firms more likely to employ more ppl
• gov funds apprenticeships
• reduce corporation tax: investment^
• tax incentives for research
• enterprise policies to encourage new business start ups

Question 18

supply side policies to cut unemployment

Answer 18

• tax cuts: tax (d) on businesses and incomes can increase investment and profits, and incentive for work. hiring^ productivity^
• deregulation: removing unnecessary regulations can reduce costs for businesses and encourage innovation and investment -> more jobs
• labour market reforms: 0 hour contracts. Makes it easier to hire and fire workers and can improve flexibility and reduce structural unemployment
• education and training: investing in education and training can improve the skills of the workforce improving mobility

Question 19

what is the natural rate of unemployment

Answer 19

the rate of unemployment when the labour market is in equilibrium at YFe.
It is the difference between those who would like a job at a the current wage rate and those who are willing and able to take a job.

Question 20

what is under-employment

Answer 20

people who are employed in roles they are over-qualified for or those working part time who wish to be working full time

Question 21

what is the UK’s unemployment goal

Answer 21

3-4%

Question 22

what is the phillips curve

Answer 22

an inverse relationship between unemployment and inflation

Question 23

what does the phillips curve look like

Answer 23

the reflection of the keynesian LRAS curve

Question 24

what does the phillips curve state

long step by step answer

Answer 24

1. when unemployment is high, inflationary pressures in an economy tend to be weak
2. a significant fall in unemployment may not cause much of a rise in inflation - spare capacity is being used up and rising employment often means efficient use of the factors of production
3. as unemployment falls further, especially cyclical unemployment, then wage pressures and price pressures begin to accelerate
4. as unemployment falls to low levels the risk of a significant increases in inflation goes up. At this stage the output gap is likely to be positive and the factors of production are experiencing shortages
5. the can lead to wage inflation which leads to a faster rise in consumer prices hence the inverse relationship between unemployment and inflation
6. the trade-off between jobs and prices has become unfavourable. when inflation is accelerating typically the central bank will start a tightening monetary policy by raising interest rates

Question 25

what is NAIRU

Answer 25

Non-Accelerating Inflation Rate of Unemployment
it is the level of unemployment below which the rate of inflation might be expected to accelerate significantly