The multiplier + Unemployment Flashcards
What is the multiplier
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
What is the multiplier formula
K=1/MPW
K=1/(1-MPC)
What does the MPW =?
= MPS(save) + MPT(tax) + MPM(import)
Define Unemployment
When people who are actively searching for employment is unable to find work
Define underemployment
Occurs when a worker is employed, but would like to work more hours
Define activity rate
The labour market activity rate is the amount of people employed (the active) and those unemployed (potentially active) as a % of the total population.
Define economically inactive
People who are not in employment or unemployed. For example, they might be studying, looking after family or long-term sick
Define Employment
People who have a job and are working
What is the Claimant Count
Records the no. of people receiving job seekers allowance
Why does the Claimant count often come up lower than ILO
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
Advantages of Claimant Count
Includes everyone who is claiming
Complied every month
Cheap to produce
What is the Labour Force Survey (International Labour Organisation)
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)
What is Structural unemployment
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)
What is Technological unemployment
The substitute of capital for labour, e.g. machine replacing production line cos cheaper
What is Cyclical unemployment
When there is too little demand for all the workers to get a job (fall in the demand for labour)
What is Seasonal unemployment
Due to change in demand for particular products across different seasons of the year (e.g. tourism, agriculture)
What is Frictional unemployment
The time when people are changing jobs
What is real wage unemployment
When the wages are forced above the normal market rate (e.g. minimum wage, trade unions, benefits) causing an excess of supply of labour
Consequences of unemployment (7)
Loss of output, Loss of income, Costs to government, Social problems, Poverty, Inequality, More unemployment (cycle)
Benefits of Migrants
More flexible than UK workers
They are consumers who increase AD
Often have skills that are needed (e.g. doctor)
Impacts of migrants on emplyment
increased employment, however reduced wage level
