Unemployment

Question 1

How does unemployment imapct output

Answer 1

If people are unemployed, the productive potential of a country is not being fully
exploited.
As a result, levels of output are lower than they could be.
This means that national income and living standards on average will be lower
AO4
However, if most of the unemployment is a result of new technology being introduced,
the output might not fall. Output could actually increase if productivity rises.

Question 2

How does unemployment impact scarce resouces?

Answer 2

Unemployed people do not contribute to production which is a waste of resources and results in lower levels of national income.
If there is full employment in an economy, output will be higher and income per head will
be higher - GDP and GDP per capita are improved/higher

Question 3

How does unemployment impact goverment spending on benefits

Answer 3

In most developed countries, unemployed people are entitled to financial benefit.
Therfore as unemployment level rise the government has to allocate more money to unemployment benefit.
This extra expenditure incurs an opportunity cost as this money could be (better) spent on education or healthcare.

Question 4

What are the 8 impacts of unemployment?

Answer 4

Output 
Use of scarce resources
Poverty
Government spending on benefits
Tax revenue
Consumer confidence 
Buisness confidence 
Society

Question 5

How does unemployment imapct society? [5]

Answer 5

Psychologically impact workers negatively
Self-doubt of their value
Stress in relationships 
Stress can lead to poorer health 
Increased crime

Question 6

Define Labour mobility

Answer 6

The ease of which workers can move geographically and occupationally between different jobs

Question 7

Why is structural unemployment likely to continue?

Answer 7

Due to poor labour mobility

Question 8

How does unemployment affect poverty?

Answer 8

In developing countries, there may have never been employment opportunities - as a result, they have to live in poverty
In developed countries, unemployed people suffer hardship, incomes fall as state benefits lower than wages.
Extreme cases people lose homes as they can’t afford mortgage payments and long-term unemployment can result in low self-esteem and family break-ups

Question 9

How does unemployment affect consumer confidence?

Answer 9

• periods of high unemployment -> consumer confidence falls
• state benefits lower than wages -> unemployed consumers lose confidence as they suffer hardship
• employed fear of losing their jobs - becomes cautious -> results in lower levels of spending, decline in growth, more unemployment

Question 10

How does unemployment affect business confidence?

Answer 10

• staff may be demotivated due to fear of being made redundant
• fewer sales due to reduced incomes
• firms producing non-essential goods/services likely to be hit harder
• decreases the confidence of business decision-makers
• take less risks, cancel investments meaning less expansion

Question 11

What are the different types of unemployment (5)

Answer 11

cyclical 
structural e.g. regional/technological/sectorial (structure of an economy over time changes) 
seasonal
voluntary 
frictional

Question 12

impact of unemployment on tax revenue

Answer 12

• unemployment rises, tr falls most linked to incomes and spending
• therefore government has to spend less or may cut public sector services
• or may borrow more increase national debt / increase tax rates