Unemployment

Question 1

What is unemployment?

Answer 1

It refers to the people who are registered as able, available and willing to work at the going wage rate in a suitable job but who cannot find paid employment despite an active search for work.

Question 2

How to measure unemployment rate?

Answer 2

(No. of unemployed / labour force) x 100%

Question 3

What are the kinds of unemployment?

Answer 3

1. Cyclical unemployment
2. Structural unemployment
3. Frictional unemployment

Question 4

What is cyclical unemployment / demand - deficit unemployment?

Answer 4

It occurs when the economy is in recession, caused by a decrease in AD.

Question 5

What is structural unemployment?

Answer 5

Structural employment occurs when the economy undergoes structural changes due to changing consumer demand and technology. These changes result in certain industries and skills becoming obsolete and at the same time such changes create demand for other industries and skills.

Question 6

What is frictional unemployment?

Answer 6

Frictional unemployment occurs when labour is in between jobs.

Question 7

What is full employment?

Answer 7

A country is said to be at full employment, or a natural state of unemployment, when the number of workers looking for jobs matches the job vacancies.

Full employment does not equal zero unemployment, as there is the existence of frictional and structural unemployment.

Question 8

What are the consequences of high unemployment?

Answer 8

1. Impact on consumers
2. Impact on firms
3. Impact on government
4. Economic costs