Unemployment

Question 1

To be classified as employed, a person must…

Answer 1

work in paid employment only one hour or more in the week

Question 2

To be classified as unemployed, a person must…

Answer 2

not have worked at all in the week before the survey, must have been actively looking for work in the past 4 weeks and must be ready to start work immediately

Question 3

what is meant by “out of the labour force”?

Answer 3

you are not available to start work immediately, or have not been actively looking for employment

Question 4

how is the unemployment rate calculated ?

Answer 4

divide the number of people unemployed by the total labour force then multiply this by 100

Question 5

what is the labour force?

Answer 5

the sum of employed and unemployed workers in the economy

Question 6

what is the labour force participation rate?

Answer 6

the percentage of the working age population that is in the labour force

Question 7

how is the labour force participation rate calculated

Answer 7

by dividing the labour force by the number of working age people, then multiplying by 100

Question 8

What effect does the participation rate have on GDP ?

Answer 8

the higher the participation rate, the more labour is available and the higher the level of potential GDP

Question 9

what are discouraged workers?

Answer 9

people are available for work but have not looked for a job during the previous 4 weeks because they believe no jobs are available for them

Question 10

what are the 2 main challenges with measuring the unemplotment rate?

Answer 10

1. the number of discouraged workers will increase during a recession
2. there are people who claim to be unemployed but are not, which leads to the unemployment rate being overstated

Question 11

what effects will a rising unemployment rate have on the economy ?

Answer 11

• Loss of GDP
  
  • Loss or deterioration of human capital
  • Retraining costs

Question 12

what effects will a rising unemployment rate have on the government?

Answer 12

• Unemployment benefit payments are a net drain on the federal budget
  
  • The opportunity cost of funds directed towards unemployment benefits
• Loss of tax revenue - individual income tax, company tax, GST and excise taxes

Question 13

what effects will a rising unemployment rate have on individuals?

Answer 13

• Loss of income
  
  • Loss of skills
  • Retraining costs
    
    • Loss of self-esteem

Question 14

what social costs will a rising unemployment contribute to?

Answer 14

• family break-ups
• health problems
• mental illness
• crime and political unrest

Question 15

what are the 4 main types of unemployment ?

Answer 15

1. Frictional
   
   2. Structural
   3. Seasonal and
      
      4. Cyclical

Question 16

what is cyclical unemployment?

Answer 16

• Caused by business cycle contraction
  
  • Falling sales lead to cutbacks on production and the sacking of workers
    
    • When the economy recovers, unemployment is slow to respond: they may wait to see
      if the recovery lasts or discouraged workers re-enter the workforce

Question 17

what is frictional unemployment

Answer 17

Short-term, arising from searching and matching process
- School leavers looking for their first job
- People re-entering the workforce
- Job creation and destruction
- People who have quit their job

Question 18

what is structural unemployment?

Answer 18

Unemployment arising from a persistent mismatch between skills and requirements of jobs.

Question 19

what is seasonal unemployment?

Answer 19

Unemployment due to factors such as weather, variations in tourism and other calendar-related events