Unemploment

Question 1

Meaning of employment

Answer 1

Employment is when people are working for payment, for example for a wage or salary

Question 2

Meaning of unemployment

Answer 2

Unemployment is when people are without paid work and are willing and able to work

“Willing” in the sense that they are actively looking for work and ‘able’ in the sense that they are available and have the ability to start working almost immediately

Question 3

Frictional unemployment

Answer 3

Reason: there is imperfect information in the labour market

-voluntary unemployment
(Not willing to accept job at current wages)
-search unemployment
(Do not accept the first job but looking for a better one)
-casual unemployment
(Out of work between periods of employment)
-seasonal unemployment
-(demand for workers fluctuates according to time of the year)
Farming industries

Question 4

Structural unemployment

Answer 4

Reason: changes in the structure of the economy

Question 5

Regional unemployment

Answer 5

Declining industries may be concentrated in a particular area of the country

Question 6

Technological unemployment

Answer 6

Occurs when workers are replaced by machinery

Question 7

International unemployment

Answer 7

Occurs when workers lose their jobs because demand switches from domestic industries to more competitive foreign industries

Question 8

Solution for structural unemployment and its drawbacks

Answer 8

1. Government spending to retrain large numbers of workers

Drawbacks
- put more pressure on government’s budget
- increase in national debt
- time lags as need years of training

Question 9

Cyclical unemployment ( demand deficient unemployment)

Answer 9

Occurs when aggregate demand decreases and the economy enters a recession

Reason:
A fall in aggregate demand leads to an increase in unsold products which results in a decrease in level of employment since demand for factors of production will fall

Question 10

Cyclical unemployment
What will happen, solution and drawbacks

Answer 10

Unemployment leads to income falling and consumer spending decreases.
Fall in AD prompts businesses to cut back production and employ fewer workers

Solution
A) Expansionary fiscal policy

Drawbacks
- time lags
- bureaucratic inefficiency
- increase in national debt

Question 11

Consequences of unemployment

Answer 11

1. Individuals
   - the unemployed
   - tax payers ( government may increase tax)
2. Firms
   - lower demand for goods and services
   -increased availability of workers at lower wages
3. Government
   - reduced tax revenue
   - increased spending
4. The whole economy
   - reduced efficiency (labour not fully utilised)
   - increased poverty
   - falling economic growth
   - lower inflation