Unemployment

Question 1

Unemployment Definition

Answer 1

When people who are willing and able to work cannot find a job.

Question 2

How to calculate unemployment

Answer 2

Unemployment= (no. of people who are unemployed/ labour force) x 100

Question 3

Labour Force Definition

Answer 3

The people who are either working or seek to work

Question 4

Participation rate formula

Answer 4

Participation rate= (labour force/ working age population) x 100

Question 5

Underemployment Definition

Answer 5

When people are employed but would like and are available to work more hours.

Question 6

Underemployment formula

Answer 6

Underemployment = (no. of part-time workers seeking more work/labour force x 100)

Question 7

Underutilisation formula

Answer 7

Unemployment rate + underemployment rate

Question 8

What is NAIRU

Answer 8

NAIRU stands for Non-Accelerating Inflation Rate of Unemployment. The NAIRU is the lowest unemployment rate that can be sustained without causing wages growth and inflation to rise. It helps tell us how much spare capacity is in the economy.

Question 9

When is an economy operating at its full capacity?

Answer 9

the difference between the NAIRU and the unemployment rate is known as the unemployment rate gap. When there is no unemployment rate gap, the NAIRU is equal to the unemployment rate meaning the economy operating at its full capacity.

Question 10

What is frictional unemployment?

Answer 10

Unemployment due to workers voluntarily changing employment.

Question 11

What is cyclical unemployment

Answer 11

Unemployment due to a reduction in demand for goods and services leads to a reduction in total output and ultimately results in a reduction in demand for the labour that produce those goods and services.

Question 12

What is structural unemployment with example

Answer 12

Unemployment caused by changes in the structure of the economy over time due to technology changes and changes in the pattern and nature of consumer spending. eg. bank tellers under threat from automatic teller machines

Question 13

What does any rate of unemployment above the NRU suggest?

Answer 13

NRU is the Natural Rate of Unemployment.
It is the minimum level of unemployment that can be achieved, given the current characteristics of the labour market. Any number above suggests there is excess capacity in the labour market.