Unemployment

Question 1

What is frictional unemployment?

Answer 1

It’s short term unemployment caused by a transition between 2 jobs resulting from frictions in the labour market creating delays.

Question 2

What are the 2 types of immobility labour?

Answer 2

• Geographical immobility of labour➡️ workers are unable to move areas in search for work
• Occupational immobility of labour➡️ when workers are unable to move from one type of job to another

Question 3

What is structural unemployment?

Answer 3

It’s long term unemployment which occurs when industries are declining.

Question 4

What is cyclical unemployment?

Answer 4

Unemployment caused by a lack of AD due to a change in the business cycle, it occurs during a recession.

Question 5

What is seasonal unemployment?

Answer 5

It’s long term unemployment, they can only work during certain seasons as it’s derived demand.

Question 6

How do you measure unemployment?

Answer 6

• Claimant count➡️ it includes ppl who are eligible to claim the job seekers allowance.
• Labour force survey➡️ it covers ppl without any job but also ppl who have looked for one in the past month and can start working in the next 2 weeks.

Question 7

What are the problems measuring unemployment?

Answer 7

• The way the stats are gathered
• Hidden unemployment eg. ppl working in jobs they’re overqualified for
• Avg stats which ignores variations eg. gender and age

Question 8

What are the costs of unemployment for individuals?

Answer 8

• Decreased wages
• Decreased QOL
• Loss of skills
• Poor mental health

Question 9

What are the costs of unemployment for firms?

Answer 9

• Decreased demand for goods and services
• Decrease in competitiveness due to a decrease in investment

Question 10

What are the costs of unemployment for governments?

Answer 10

• Increased unemployment benefits
• Decreased tax revenues
• Increased crime

Question 11

What are the costs of unemployment for the economy?

Answer 11

• Wasted resources
• Decrease in GDP
• Increase in poverty
• Decrease in potential output due to loss of skills

Question 12

What is full employment?

Answer 12

It’s when all available labour resources are being used in the most economically efficient way.

Question 13

What is the real wage?

Answer 13

It’s the purchasing power of the nominal wage.

Question 14

What is real wage unemployment?

Answer 14

It’s caused by real wages being stuck above the equilibrium real wage.