Unemployment

Question 1

What 3 factors control unemployment

Answer 1

government - using policies

firms - control workforce

employees - optimise opportunities

Question 2

Why are their conflicts between macro policies

Answer 2

government priorities change

objectives depend on a countries stage of development

rising standards of living

nothing in macroeconomics happens in isolation

a government may satisfice (tolerate trade offs)

Question 3

supply side policies to reduce unemployment

Answer 3

education and training
geographical subsidies
labour market reforms
employment subsidies
reduce power of trade unions

Question 4

demand side policies to reduce unemployemnt

Answer 4

monetary policy - cutting interest rates to boost AD
fiscal policy - cut tax/increase governemnt spending to boost AD
depreciation of exchange rate - to boost export demand

Question 5

how can you measure unemployment

Answer 5

number of people who claim unemployment benefits (claimant count)

labour force survey - 60,000 homes surveyed every quarter to discover empployment situations

international labour organisation

Question 6

what are the general costs of unemployment

Answer 6

inefficient use of resources
loss of income for unemployed
less tax revenue, higher government borrowing (welfare benefits)
loss of human capital

Question 7

what are personal costs of unemployment

Answer 7

loss of earnings - poverty
potential homelessness
harms fututre prospects
loss of human capital
affects confidence

Question 8

costs of unemployment to government

Answer 8

fall in tax revenue
more welfare payments

Question 9

what are the supply side causes of unemployment

Answer 9

-frictional
-structural missmatch of skills
-geographical immobility
-real wage unemployment
-lack of incentive to work
-technological change

Question 9

costs of unemployment to society

Answer 9

lower GDP for the economy
economy openating below its full capacity/inefficient
lower spending and lower output
higher crime rates

Question 10

demand deficient causes of unemployment

Answer 10

-high interest rates
-global recession
-negative multiplier effect
-financial crisis

can be seen on LRAS/AD diagram

Question 11

what is real wage unemployment

Answer 11

wages set above the equilibrium level, attract more workers to work in an industry than are demanded

can be seen on the wage/unemployment supply and demand diagram