Full Employment And Unemployment Flashcards
Define unemployment
Refers to the situation where people who are available for work and are actively seeking work cannot find jobs
Define full employment
State where all factors of production (CELL) are fully and efficiently utilised
What are the types of unemployment (3)
Cyclical (demand-deficient)
Structural
Frictional
What causes cyclical unemployment, and what 2 concept must be used to explain it
- caused by fall in AD
- use K effect
- labour as a derived demand — demand for labour falls as demand for goods (AD) falls
When is there cyclical unemployment
Recession
What is structural unemployment
Unemployment that occurs due to a mismatch of skill between unemployment and skills required by producers seeking labour
What are the 4 causes of structural unemployment
- Changes in patterns of demand
- change in state of economy (e.g. isi eoi) - Foreign competition/change in comparative advantage
- Hangs in technology and occupational immobility
- when production methods change etc — upgrading of skills needed - Geographical immobility
- willingness (or lack thereof) of people to relocate to find jobs
What is frictional unemployment
Unemployment as a result of unemployed taking time to find new jobs
What are the 4 consequences of unemployment
- Forgone output/income in the economy and lower living standards
- Strain on government budget
- Social problems
- Hysteresis (for cyclical unemployment)
What should be used (what concept/diagram) to explain how unemployment leads to forgone output and lower living standards
PPC
Unemployment -> lower quantity of goods produced -> output and incomes fall -> material and non-material SOL
How does unemployment lead to a strain on government budget
Unemployment -> lower tax revenue vs higher expenditure -> budget deficit
Explain hysteresis
Where protracted long term unemployment deskills and demoralises workers — no longer incentivised to seek employment even after economy recovers
