unemployment

Question 1

economically active meaning

Answer 1

those who are either in work or seeking work

Question 2

economically inactive

Answer 2

those who aren’t in paid work but are also not looking for a job or available to start work

Question 3

claimant count

Answer 3

way of measuring unemployment - through those who are registered as unemployed and claiming unemployment benefits.

Question 4

labour force survey (ILO)

Answer 4

Labour force survey asks 60,000 people if they are unemployed and whether they are looking for a job - could be subject to sampling errors

Question 5

labour force survey definition of unemployment

Answer 5

someone who has been actively seeking work for past four weeks but ready and able to start in the next two weeks

Question 6

frictional unemployment

Answer 6

unemployed workers who are in-between jobs for a short period (not a huge concern and the internet has helped with this).
- Could say it is a positive sign for economy as people are willing to take risks to find a better job

Question 7

structural unemployment

Answer 7

when workers lack the skills that new expanding industries require (caused by structural economic change)

Question 8

Technological unemployment

Answer 8

A form of structural unemployment when humans are replaced by technology e.g. Charlie and chocolate factory

Question 9

Seasonal unemployment

Answer 9

when people are unemployed due to a change in seasons e.g. dress up Santa are unemployed in summer

Question 10

cyclical unemployment

Answer 10

caused by a lack of aggregate demand and a recession

Question 11

classical unemployment

Answer 11

when real wages are above their market-clearing level leading to an excess supply of labour

Question 12

impact of unemployment on workers

Answer 12

• falling incomes
• poverty
• depression
• health problems
• poor standard of living
• debt problems

Question 13

what is a hysterisis

Answer 13

when the natural rate of unemployment after a recession increases as those who became unemployed in the recession become unmotivated and deskilled

Question 14

impact of unemployment on the economy

Answer 14

• if unemployment is not due to replacement by capital, it is likely that GDP will fall
• increased budget deficit as tax revenues fall and welfare payments rise (automatic stabilisers)
• may cause rising income inequality
• increased crime - people have more free time and may not spend it in best way
• if there is a hysterisis, LRAS shifts left (productive potential of economy decreases)

Question 15

causes of unemployment

Answer 15

Demand-side factors: (demand of labour from firms)
- confidence of firms
- cost of hiring and level of labour regulation
- health of firms e.g. profit levels
Supply-side factors (supply of labour from workers):
- skills of workers
- geographic mobility of workers
- occupational mobility of workers
- labour market flexibility

Question 16

what is the replacement ratio

Answer 16

out of work disposable income ➗in work disposable income
- the closer this is to 1, the lower the incentive to work - can increase voluntary unemployment