MACRO - LS9 - Employment & Balance Of Payments Flashcards
1
Q
Types of unemployment
A
- frictional unemployment
- seasonal unemployment
- structural unemployment
- cyclical/demand-deficient unemployment
- real wage unemployment
2
Q
Frictional unemployment
A
- most people who leave/lose a job quickly get new ones
- short term unemployment is known as frictional unemployment - not seen as a serious problem
- time unemployed varies - higher benefits/redundancy pay more time they can afford unemployment
3
Q
Seasonal unemployment
A
- some workers tend to work on a seasonal basis e.g. tourism/construction industries
- it tends to rise in winter when some workers are laid off but falls in summer when taken on
- little can be done to prevent pattern
4
Q
Structural unemployment
A
- demand for labour is less than its supply in an individual labour market
- e.g. regional unemployment - south more at full employment whereas north more unemployed - due to lack of mobility of factors of production between regions
- another example is sectoral unemployment - e.g less steel/coal industry - without retraining/relocation they can’t adapt
- also technological unemployment - groups of workers put out of work due to tech replacing them
5
Q
Cyclical/demand-deficient unemployment
A
- occurs when economy isn’t booming
- there is insufficient AD for all workers to get a job
- capital is also under-utilised
6
Q
Real-wage unemployment
A
- also known as classical unemployment
- real wages are stuck at a level above what’s needed to reduce unemployment - they are inflexible downwards (can’t decrease)
- one cause is minimum wage, unemployed workers may be willing to work for less then minimum wage and employers may take on more workers if they can pay less
- but employers legally can’t pay less means unemployed can’t get another job
- another cause is unemployed workers refusing to take a job as they can get more in welfare
7
Q
What causes the different types of unemployment
A
- cyclical unemployment is caused by lack of demand in economy
- frictional, seasonal, structural and real wage unemployment is caused by supply side factors
8
Q
3 diagrams to show unemployment
A
- PPF
- AD/AS
- OUTPUT GAP
9
Q
PPF
A
- unemployment occurs when inside the PPF as underutilisation of resources
10
Q
AD/AS
A
- shows cyclical unemployment
- when LRAS is above intersection of SRAS & AD - underutilisation
- if increase in AD then a shift occurs restoring full employment
11
Q
Output gap
A
- trend growth shown by upward sloping line
- underneath line is negative output gap - recession
- an increase in AD will eliminate cyclical unemployment
- Although may not include supply side improvements (?) which reduce frictional, seasonal or structural unemployment.
12
Q
Migration
A
- since 1990’s large increase in immigration
- more likely to be employed and less likely to claim benefits as usually of working age
- their spending creates more jobs (circular flow of income) causing employment increase
- can argue decreases wage rate, and affects low skilled UK workers
13
Q
Skills
A
- average skill level needed for a job is higher than used to be and will likely be higher in the future
- skills required by jobs aren’t always matched by job seekers - structural unemployment
- if firms won’t train workers gov has to step in to correct market failure but the training is costly
14
Q
4 key ways globalisation has been taking place
A
- proportion of output of an individual national economy which is traded internationally is growing
- ever-increasing ownership of physical & financial assets such as companies or shares or loans in one country by economic actors in another country
- individuals are migrating in increasing numbers from one country to another
- tech is being shared between countries on a faster basis
15
Q
4 major macroeconomic objectives
A
- low unemployment, achieving full employment
- low & stable inflation, avoiding deflation
- economic growth on a par with similar economies
- balance of payments equilibrium, incl. current account
