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Macroeconomics SEM 2 > Unemployment > Flashcards

Unemployment Flashcards

1
Q

Who is considered Economically Inactive?

A

those NOT in the Labour Force

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2
Q

What is the Labour Force?

A

Labour Force = No. of Employed + No. of Unemployed people

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3
Q

How is the Unemployment Rate calculated?

A

Unemployment Rate = [No. of Unemployed / Labour Force] x 100

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4
Q

Define Labour Force Participation Rate

A

% of Adult Population in the Labour Force

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5
Q

How is the Labour Force Participation Rate calculated?

A

L.F - P.R = [Labour Force / Adult Population] x 100

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6
Q

What are the 2 main Measures of Unemployment?

A
  1. Claimant Count

2. Labour Force Survey

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7
Q

How is the Claimant Count conducted?

A

Measures No. of people claiming Unemployment related benefits relative to the No. of people paying Income Tax

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8
Q

What is the main issue with the Claimant Count?

A

No. of people eligible to claim benefits changes

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9
Q

How does the Labour Force Survey work?

A

Asks people directly

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10
Q

Why can the Rate of Unemployment differ?

A
  • Age, Sex, Ethnicity…

- Different Groups have different Participation rates

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11
Q

What. is L.F-P.R affected by?

A
  • Women’s role in Society
  • New Technologies - easier to access Labour Market
  • Improved Birth Control
  • Changing Political + Social attitudes
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12
Q

Why has Men’s Participation decreased?

A
  • Younger Men stay in Education
  • Older men retire earlier + live longer
  • More Women working–> more men stay at home
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13
Q

Who is NOT part of the Labour Force?

A
  • Full-time Students
  • Retirees
  • Stay-at-home Parents
  • Full-time Carers
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14
Q

Define Natural Rate of Unemployment

A

Unemployment which does NOT go away, even in LR

–> NRU around which Unemployment Rate fluctuates

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15
Q

Define Cyclical Unemployment

A

Deviation of Unemployment from its Natural Rate

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16
Q

Whats the general Pattern of Unemployment?

A

Movements into + out of Labour Force are common

– More than 1/3 of Unemployed- recent entrants

17
Q

What are Discouraged Workers?

A

Unemployed who do NOT find a job + still want to work- BUT Give Up looking

18
Q

What type of Unemployment is often Observed + why?

A

Long Term Unemployment often observed at any given time

– Most Unemployment is Short Term- NOT captured by Measures as New Jobs often found

19
Q

What are the 2 main components to the NRU?

A
  • Structural Unemployment

- Frictional Unemployment

20
Q

How is Structural Unemployment caused?

A

Min. Wages
Unions
Efficiency Wages
–> Above-Equilibrium Wages–> Unemployment

21
Q

How is Frictional Unemployment caused?

A
  • Changes in Demand for Labour among diff. firms

- Changes in Composition of Demand among industries or regions

22
Q

What is Search Unemployment?

A

Unemployment while Workers + Employers match

- takes time for them to match

23
Q

Policy for Frictional Unemployment

A
  • Aim to Reduce Time for Unemployed to find jobs
  • Retrain people with ‘unwanted’ skills
  • -> Decrease NRU
  • Gov. Programmes- Facilitate job search
  • -> e.g. Job Centres + Public Training programmes + Apprenticeships
24
Q

Policy for Structural Unemployment

A

Controversial- Aims to Reduce Real Wages

  • Reduce / Shorten duration of Unemployment benefits
  • Reduce Min. Wage
  • Easier to Hire/Fire workers
  • Improve Wage Flexibility
25
Q

How does Min. Wage cause Unemployment?

A

Forces Wages above Equilibrium level

  • -> Increased Labour Supply + Decreased Labour Demand
  • -> Surplus of Labour- Unemployment
26
Q

What is a Union?

A

Worker Association

- Bargains with Employers over Wages, Benefits + Worker Conditions

27
Q

How do Unions cause Unemployment?

A

Push Wages above Equilibrium

- Unemployment / harder to find a job

28
Q

Who are the Winners + Losers of Unions?

A

Winners- Employed who benefit from Higher Wage (Insiders)

Losers- Unemployed (Outsiders)

29
Q

How else do Unions affect the Labour Market?

A

Lower Flexibility–> Harder to Lower Salaries + Fire Workers

30
Q

What are Efficiency Wages?

A

Increase Wages to Increase Productivity

  • May be due to Increased Motivation
  • Higher Wage –> Better Health –> Higher Productivity
  • Attract Better Workers

Macroeconomics SEM 2 (13 decks)

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