Full employment

Question 1

Define full employment

Answer 1

The level of employment that exists when the government’s economic growth is achieved and where there is no cyclical unemployment.

Question 2

Define non-accelerating inflation rate of unemployment

Answer 2

The lowest inflation rate possible before it starts to accelerate again. (natural rate of employment)

Question 3

What % of the labour force is considered at which there is no cyclical unemployment?

Answer 3

5%

Question 4

What are the types of unemployment?

Answer 4

Cyclical

Natural

• structural
• seasonal
• fictional
• hardcore

Question 5

Define structural unemployment

Answer 5

Skills of employee doesn’t match the skills required by the industry.

Question 6

Define seasonal unemployment

Answer 6

Person is unemployed because their skills are only demanded during certain times of the year. Eg ski resort workers.

Question 7

Define fictional unemployment

Answer 7

Person is unemployed for a period of time while they are moving from one job to another.

Question 8

Define hardcore unemployment

Answer 8

When a person is unemployed due to mental, physical or other characteristics that prevent them from receiving a job offer.

Question 9

Define employed

Answer 9

A person who is over the age of 15 and is working at least 1 hour a week.

Question 10

Define unemployed

Answer 10

A person over the age who doesn’t work at least one hour a week but is actively searching for work.

Question 11

Define labour force

Answer 11

All the people over the age of 15 who are willing and able to work. Labour force = employed + unemployed

Question 12

What is the formula for the unemployment rate?

Answer 12

number of people unemployed divided by total number of people 15 or over in the labour force X 100.

Question 13

What is the formula for the participation rate?

Answer 13

Total number of people in the labour force divided by total number of people 15 or over in the population X 100.

Question 14

What influences the participation rates in the economy?

Answer 14

• Incentives (mothers/childcare fees)
• Increasing retirement age (pension age no 66.5)
• Increase/decrease in immigration

Question 15

Define underemployment

Answer 15

Where people are employed but would like more hours.

Question 16

Define disguised employment

Answer 16

Where people have jobs but are underemployed as they are not working to capacity.

Question 17

Define underutilisation

Answer 17

The extent to which the available labour is not working at its capacity.

Question 18

What is the underutilisation rate?

Answer 18

unemployment rate + underemployment rate

Question 19

Define hidden unemployment

Answer 19

People who would like to work but have become discouraged from seeking employment and are no longer actively seeking work.

Question 20

What is the effect on unemployment when there is an increase in participation rates?

Answer 20

• Short term- increase unemployment as more people will be seeking jobs.
• Long term- adds to aggregate supply= reducing wage costs and encourages workers to be more productive to keep their jobs.

Question 21

Define cyclical unemployment

Answer 21

Unemployment caused by a downturn in the economy.

Question 22

What causes cyclical unemployment?

Answer 22

• Consumer confidence falls
• Exchange rates appreciate (increase) AUD
• Economic growth overseas- decreases- decreasing exports = decrease in AD = Increases unemployment

Question 23

What is the impact of unemployment?

Answer 23

• Lowers income and creates inequalities.

- Reduces living standards (material and no-material)

Question 24

What is the goal of full employment?

Answer 24

To have no cyclical unemployment