Real Wage And Natural Unemployment Flashcards
What type of unemployment is at labour equilibrium?
Natural unemployment
What type of unemployment is at labour disequilibrium?
Real wage unemployment
What type of unemployment is at good’s disequilibrium?
Demand deficient/cyclical unemployment
What is the AGGREGATE DEMAND OF LABOUR (ADL)?
The aggregate houses of labour firms require at a given wage rate.
What is the AGGREGATE SUPPLY OF LABOUR (ASL)?
The aggregate hours workers are willing and able to supply at a given wage rate.
What is E on a labour market equilibrium graph?
The number of workers that are engaged in production at a given wage rate.
What is W on a labour market equilibrium?
The wage rate after adjustments have been made for inflation.
What does LF stand for on a labour market equilibrium graph?
The number of individuals of working age and fit for work.
What does ELF > EAS mean in a labour market equilibrium graph?
LF is always greater than AS as always some workers NOT willing or able to work.
What does UNR stand for on a labour market equilibrium graph?
Extent of difference is the level of natural unemployment
What are the components of natural unemployment?
Frictional
Structural
What are the determinants of natural unemployment?
• Welfare issues
• Location issues
• Skill mismatch issues
What are the causes of real wage unemployment?
• Sticky Wages
• Trade Unions
• Min Wage
• Welfare Benefits
What is the definition of natural unemployment?
The rate of unemployment that prevails even when the economy is at the full employment output level.
What is the definition of real wage unemployment?
Occurs when the real wage is above the equilibrium wage in the market and ASL>ADL. The labour market is in disequilibrium.
