unemployment

Question 1

What is the unemployment rate calculation

Answer 1

(# of unemployed / # in labour force ) x 100

Question 2

What does the unemployment rate include and what does it exclude

Answer 2

1. not everyone without a job counts as unemployment
2. only includes people who are actively looking for work

Question 3

Explain labour force

Answer 3

of people that are actively looking for a job or have a job

at least 16 years old, not institutionalized and not in the military

Question 4

How do you calculate the participation rate

Answer 4

(# of people in lab force / working age population) x 100

Question 5

What are the issues with the participation rate

Answer 5

1. part-time workers are considered fully employed(even if they need to find another job to make ends meet)
2. when people stop looking for a job
   - called discouraged workers
   - no longer considered unemployed, b/c they left the labour force
   - unemployment rate actually falls, looks like the economy is doing better, but it’s not

Question 6

What are the 3 types of unemployment

Answer 6

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

Question 7

explain Frictional unemployment

Answer 7

workers are temporarily unemployed b/w jobs

• will always exist b/c there will always be people leaving and switching jobs
• temporary
• always exist

Question 8

Explain structural unemployment

Answer 8

Changes in the structure of the labour force, no longer have skills

• make some skills obsolete
• workers do not have transferable skills and these jobs wil never come back
• long term unemployment
• always exist

Question 9

What does Frictional unemployment + Structural unemployment make up

Answer 9

the natural rate of unemployment

Question 10

NRU

Answer 10

natural rate of unemployment

• the amount of employment that exists when the economy is healthy

Question 11

Explain Cyclical unemployment

Answer 11

result of an economic downturn or recession

• as demand for goods and services fall, the demand for labour falls and workers are laid off

Question 12

NRU will always have what, even if in healthy economy

Answer 12

Frictional and Structural unemployment