Unemployment

Question 1

Name the 9 types of unemployment:

Answer 1

Frictional, structural, technological, demand deficient or cyclical, classical or real wage, voluntary, involuntary, equilibrium, natural rate of unemployment.

Question 2

Replacement ratio formula:

Answer 2

Disposable income out of work ➗ disposable income in work

Question 3

Define frictional unemployment:

Answer 3

Those in between jobs for a short period of time- not a major concern.

Question 4

Define structural unemployment:

Answer 4

When major industries such as coal mining, steel production and manufacturing decline. People lack skills that new expanding industries require due to being occupationally or geographically immobile.

Question 5

Define technological unemployment:

Answer 5

When humans are replaced by technology; form of structural unemployment.

Question 6

Define demand deficient (cyclical) unemployment:

Answer 6

Caused by recession and lack AD and therefore associated with a negative output gap.

Question 7

Define classical (real wage) unemployment:

Answer 7

When real wages above market clearing level and high minimum wages above equilibrium level lead to excess supply of labour.

Question 8

Define voluntary unemployment:

Answer 8

When worker doesn’t accept work at existing wage rates (for example when worker is caught in unemployment trap due to generous welfare benefits).

Question 9

Define involuntary unemployment:

Answer 9

When worker accepts work at existing wage but can’t get job offer.
Type of cyclical unemployment.

Question 10

Define natural rate of unemployment:

Answer 10

. Similar to equilibrium unemployment.
. When aggregate demand for labour equals aggregate supply and includes voluntary, frictional and structural unemployment.
. Occurs at natural rate of output.