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Economics (Macro) > Unemployment > Flashcards

Unemployment Flashcards

1
Q

What is unemployment

A

Those without a job, who are looking for work and prepared to accept a job at the current wage rate

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2
Q

Which people are excluded from the labour force

A

Those who are unable to work and those who are in full time education, the labour force includes the unemployed

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3
Q

Which people are part of the claimant count

A

Those eligible to receive job seekers allowance

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4
Q

What are the 3 questions asked in the LFS survey

A
  • Have you got a job
  • Have you looked for a job in the last 4 weeks
  • Are you available to start work in the next 2 weeks
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5
Q

What are the 3 types of unemployment

A

Cyclical
Structural
Frictional

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6
Q

What is cyclical unemployment

A

Caused by a lack of AD in the economy

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7
Q

When is cyclical unemployment typical

A

It is a feature of a recession and is associated with a negative output gap

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8
Q

How can cyclical unemployment be solved

A

By increasing AD in the economy (e.g. decrease interest rates)

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9
Q

What is structural unemployment

A

Occurs due to the changing nature of a dynamic economy
Certain industries decline and new industries start up
The UK has been through a period of deindustrialisation causing a lot of structural unemployment

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10
Q

What are the two reasons why a decline in certain industries creates structural unemployment

A

Geographical immobility
Occupational immobility

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11
Q

Give two examples of geographical immobility

A
  • House prices being too high where jobs are available
  • Family/Community ties
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12
Q

What is occupational immobility

A

The inability to move between jobs because of a lack of relevant, transferable skills, education and experience

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13
Q

How can we solve structural unemployment

A

Through the use of supply side policies

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14
Q

What is frictional unemployment

A

Usually low level, short term unemployment caused by people leaving their current job with the aim of finding a better job

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15
Q

Why is frictional unemployment considered a positive sign

A

Due to workers believing that new jobs and opportunities are available

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16
Q

Why does full employment still mean there is 2/3% unemployment

A

These unemployed people are mainly frictionally unemployed

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17
Q

How can we reduce frictional unemployment

A

The internet: allowing people to find their new jobs to start right when they leave their previous job

18
Q

What is under employment

A

Where workers are employed but not fully utilising their skills, they could be more productive

19
Q

What does unemployable mean

A

The idea that over time workers lose the skills & personal ,motivation to work and find it difficult to become employed

20
Q

How long is long term unemployment

A

Over a year

21
Q

What is the age range for youth unemployment

A

18-24

22
Q

What are 5 costs of unemployment

A

Society costs
Individual costs
Lost output
Lower standard of living
Lower government budget

23
Q

Give 3 examples of society costs of unemployment

A

Crime
Anti social behaviour
Drug use

24
Q

Give 2 examples of individual costs of unemployment

A

Loss of self worth
Psychological problems

25
Q

Explain how unemployment leads to a decrease in the government budget

A

Increased spending on welfare
Decrease in tax revenue (Income, N.I, VAT)

26
Q

How does a lower government budget due to unemployment affect the economy

A

Less spending on healthcare, infrastructure, education etc

27
Q

Draw the diagram for real wage unemployment

A

In notes

28
Q

What is on the X and Y axis on the diagram for real wage unemployment

A

X- Q of labour
Y - Wage

29
Q

Explain real wage unemployment

A

Unemployment is an excess supply of labour, meaning the labour market failed to find equilibrium
To remove this, wages must fall to restore equilibrium
However there are imperfections in the labour market which prevent wages from falling
Therefore real wage unemployment remains
Quick definition: (where wages are set above equilibrium level causing excess supply of labour)

30
Q

Keynes said wages are sticky downwards, what does this mean

A

When they go up, they rarely go down

31
Q

What are 3 imperfections in the labour marker which stop wages falling to store equilibrium and eliminating real wage unemployment

A

Minimum wage
Trade unions
Worker rights (contractual/legal)

32
Q

Draw and explain a diagram showing the creation of real wage unemployment due to decreased demand of a good

A

Demand decreases
Labour is a derived demand so demand for labour decreases
However wages cannot fall as they are sticky downwards (and workers have rights)
Therefore real wage unemployment is created

33
Q

What is the natural rate of unemployment

A

The level of unemployment when the labour market is in equilibrium

34
Q

Draw and label the diagram for the natural rate of unemployment

A

In notes

35
Q

Whyis the natural rate of unemployment sustained

A

By the benefits system and the failure of SSPs

36
Q

What are the 3 curves on a natural rate diagram

A

A.J - Accepting Jobs (s)
L.F- Labour force (s)
L.D - Labour demand (d)

37
Q

Which curve in the natural rate diagram shifts when the natural rate is reduced

A

A.J shifts right

38
Q

How can we reduce the natural rate of unemployment

A

Reforming the benefits system
More effective SSPs (education, training and transport)

39
Q

Where is the distance of the natural rate of unemployment on a diagram

A

The difference between L.F (those in labour force) and A.J (those willing to accept a job at the current wage rate L.D=A.J) at the wage rate LD = A.J

40
Q

Draw the diagram showing real wage unemployment in the natural rate

A

In notes

41
Q
A

Economics (Macro) (10 decks)

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