employment and unemployment

Question 1

what is the natural rate of unemployment?

Answer 1

It represents the level of unemployment that persists in an economy when it is at full employment, meaning there is no cyclical or deficient-demand unemployment.

Question 2

what does the natural unemployment rate encompass?

Answer 2

the frictional and structural unemployment that is present even in the most healthy, well-functioning economies.

Question 3

what is voluntary unemployment?

Answer 3

Voluntary unemployment occurs when someone chooses not to work at the current
wage rate.

Question 4

what is involuntary unemployment?

Answer 4

A person is involuntarily unemployed when they are willing and able to work at the
current wage rate, but they cannot find work.

Question 5

what are some causes of involuntary unemployment?

Answer 5

. It is usually cyclical, since it is caused
by a fall in AD. Moreover, it occurs when there is an excess supply of labour, which
‘sticky wages’ are unable to correct. When an economy experiences involuntary
unemployment, it is not operating at full employment.

Question 6

what are causes of voluntary unemployment?

Answer 6

This could be encouraged in welfare payments are generous relative to
real wages. A high income tax rate might also discourage people from participating
in the labour market.

Question 7

what is structural unemployment?

Answer 7

This occurs with a long term decline in demand for the goods and services in an
industry, which costs jobs.

Question 8

example of structural unemployment?

Answer 8

This is especially true of jobs in industries such as car
manufacturing, where labour is replaced by capital (this is also called technological
unemployment). Moreover, the decline of the coal and ship building industries in
the UK, led to a great deal of structural unemployment.

Question 9

how is structural unemployment worsened by geographical and occupational immobility of labour?

Answer 9

If workers do not have the transferable skills to move to
another industry, or if it is not easy to move somewhere jobs are available, then
those facing structural unemployment are likely to remain unemployed in the long
run.

Question 10

what is frictional unemployment?

Answer 10

This is the time between leaving a job and looking for another job. It is common for
there to always be some frictional unemployment, and it is not particularly damaging
since it is only temporary.

Question 11

what is an example of frictional unemployment?

Answer 11

For example, it could be the time between graduating from university and finding a
job.

Question 12

why does the existence of frictional unemployment prevent 100% employment?

Answer 12

there will always be people moving
between jobs.

Question 13

what is demand deficient (cyclical) unemployment?

Answer 13

This is caused by a lack of demand for goods and services, and it usually occurs
during periods of economic decline or recessions.

Question 14

what is cyclical unemployment linked to?

Answer 14

It is linked to a negative output
gap

Question 15

what leads to cyclical unemployment?

Answer 15

Firms are either forced to close or make workers redundant, because their
profits are falling due to decreased consumer spending, and they need to reduce
their costs. This then causes output to fall in several industries.

Question 16

what could cyclical unemployment also be caused by?

Answer 16

This type of unemployment could actually be caused by increases in productivity,
which means each worker can produce a higher output, and therefore fewer workers
are needed to produce the same quantity of goods and services.

Question 17

what is seasonal unemployment?

Answer 17

This occurs during certain points in the year, usually around summer and winter

Question 18

what is an example of seasonal unemployment?

Answer 18

During the summer, more people will be employed in the tourist industry, when
demand increases.