Unemployment

Question 1

how is working population split?

Answer 1

economically active ( all persons, within the population, who contribute to economic activity or are available to contribute to economic activity.) and economically inactive ( People not in employment who have not been seeking work within the last 4 weeks and/or are unable to start work within the next 2 weeks. )

Question 1

How is population split?

Answer 1

working population
and non working population

Question 2

how is economically active split?

Answer 2

labour supply (The labour supply is the number of hours people are willing and able to supply at a given wage rate.) and structurally unemployed ( workers lack the requisite job skills or live too far from regions where jobs are available and cannot move closer.)

Question 3

what does labour supply split into

Answer 3

employed and frictionally unemployed(Frictional unemployment is the result of workers searching for new employment or transitioning from their old jobs to new ones.) ?

Question 4

What is labour demand?

Answer 4

Labour Demand = The Number of
Workers Firms are willing to take at a
given wage rate.

Question 5

What is labour supply?

Answer 5

Labour Supply = The Number of
Workers willing and able to work at
a given wage rate.

Question 6

Facts about the labour force?

Answer 6

• The labour force. The LF curve in the
  following diagram shows how many people want to be in the labour force at each possible real wage
• The LF curve slopes upwards: as the real
  wage rises more people will wish to be in
  the labour force

Question 7

Facts about equilibrium employment?

Answer 7

• At the equilibrium real wage W1 some
  people will have jobs and will be in (natural) employment
• The rest will be in (natural) unemployment
• The people in natural unemployment will be structurally unemployed plus those who are frictionally unemployed

Question 8

Issues with Demand side
Policies

Answer 8

• Inflation: At full employment the 𝐴𝑆 curve is vertical and any shift in 𝐴𝐷 to the right will cause inflation without reducing
  unemployment
• Does not correct frictional or structural
  unemployment
• Generally, a mixture of supply side and
  demand side policies may reduce
  unemployment without inflation

Question 9

facts about demand side policies?

Answer 9

❑ If unemployment is caused
by the fall in 𝐴𝐷 during the
business cycle the this is
demand deficient unemployment. There are insufficient vacancies at
current wages
❑ Fiscal and monetary policy
can lead to an increase in 𝐴𝐷 and therefore the demand for labour.
❑ This will normally lead to an
increase in inflation as well
as employment
❑ The nearer to full employment the greater will be the threat of inflation