The multiplier + Unemployment

Question 1

What is the multiplier

Answer 1

when an initial injection into the economy, or circular flow of income, causes a larger final increase (or decrease) in the level of real national income/output

Question 2

What is the multiplier formula

Answer 2

K=1/MPW

K=1/(1-MPC)

Question 3

What does the MPW =?

Answer 3

= MPS(save) + MPT(tax) + MPM(import)

Question 4

Define Unemployment

Answer 4

When people who are actively searching for employment is unable to find work

Question 5

Define underemployment

Answer 5

Occurs when a worker is employed, but would like to work more hours

Question 6

Define activity rate

Answer 6

The labour market activity rate is the amount of people employed (the active) and those unemployed (potentially active) as a % of the total population.

Question 7

Define economically inactive

Answer 7

People who are not in employment or unemployed. For example, they might be studying, looking after family or long-term sick

Question 8

Define Employment

Answer 8

People who have a job and are working

Question 9

What is the Claimant Count

Answer 9

Records the no. of people receiving job seekers allowance

Question 10

Why does the Claimant count often come up lower than ILO

Answer 10

Doesn’t count 16-18 yr olds
The definition of unemployed it tailors so less people can be eligible
Those seeking part time work don’t count
Those who have PT and want FT don’t count
High earning spouse means you don’t qualify

Question 11

Advantages of Claimant Count

Answer 11

Includes everyone who is claiming
Complied every month
Cheap to produce

Question 12

What is the Labour Force Survey (International Labour Organisation)

Answer 12

A quarterly survey
Random sample of 60,000 households, with about 100,000 people
Classes unemployment as: seeking a job for 4 weeks, can work in 2 weeks (more inclusive)

Question 13

What is Structural unemployment

Answer 13

Long term unemployment caused by a change in the structure of the economy
e.g. reduction in the production of steel, or skills aren’t easily transferable (steel to IT)

Question 14

What is Technological unemployment

Answer 14

The substitute of capital for labour, e.g. machine replacing production line cos cheaper

Question 15

What is Cyclical unemployment

Answer 15

When there is too little demand for all the workers to get a job (fall in the demand for labour)

Question 16

What is Seasonal unemployment

Answer 16

Due to change in demand for particular products across different seasons of the year (e.g. tourism, agriculture)

Question 17

What is Frictional unemployment

Answer 17

The time when people are changing jobs

Question 18

What is real wage unemployment

Answer 18

When the wages are forced above the normal market rate (e.g. minimum wage, trade unions, benefits) causing an excess of supply of labour

Question 19

Consequences of unemployment (7)

Answer 19

Loss of output, 
Loss of income, 
Costs to
government, 
Social problems,
Poverty, 
Inequality, 
More unemployment (cycle)

Question 20

Benefits of Migrants

Answer 20

More flexible than UK workers
They are consumers who increase AD
Often have skills that are needed (e.g. doctor)

Question 21

Impacts of migrants on emplyment

Answer 21

increased employment, however reduced wage level