L3 Unemployment & L4 Price Level Flashcards

1
Q

Unemployment

A

People who can work, wants a job but can’t find one

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2
Q

Unemployment Measure? Draw diagram and formulas

A

Labour force survey by ONS
Unemployment= unemployed/workforce
-find job 4 weeks
-wait for call
-wait to start job
Employment= employed/working age (the potential labour supply used up in the country), whether they want to work or not
Economic activity= economically active/working age
Shows status of the economy and can explain changes in labour market

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3
Q

Limitations of unemployment

A

Underemployment- part time work
Discouraged workers
Long term unemployment
Economic limitations eg. Globalization / business cycle

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4
Q

Long term unemployment

A

Very costly; tech change, learning cost, cost of time, time to learn new skill and human capital loss
Less income and production

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5
Q

Types of unemployment

A

Frictional- new graduates looking for jobs
Structural- competition with international industries
Cyclical- business cycle
Natural- cyclical is zero, age, minimum wage (could also be s and c)

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6
Q

Price Level, what for?

Changes in PL

A

Average levels of prices in the economy. Value of money

Real purchasing power vs economic variables

Rise- inflation (hyperinflation if big)
Fall- deflation

Small change is ok.
Big rise will cause GDP lower and less employment, redistribute wealth and income & divert resources from production

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7
Q

Measure? PL

A
RPI or CPI 
Retailer(household basket) /consumer(all expenditure) price index
-basket
-price survey
-price index
  • costs at current prices
  • costs at base prices
  • PL current/PL previous x 100

Alternative way: GDP Deflator
Broader measure hence slight diff
Nominal GDP/ real GDP x 100

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8
Q

Index numbers

A

Why? easy to read off of diagrams
% change relative to base yr= PL-100
Base yr- 100

Time seriesindex (%)
Value yr x/base yr x 100
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9
Q

Inflation

A

% of increase in price level from one period to another

(PLcur-PLprev)/PLprev x 100

Gradient of the graph

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