Unemployment

Question 1

Categories of unemployment

Answer 1

1. Natural rate of unemployment (long term)

2. Cyclical rate of unemployment (short term)

Question 2

Natural rate of unemployment

Answer 2

Unemployment that does not go away on its own even in the long run.
It is the amount of unemployment that the economy normally experiences

Question 3

Cyclical unemployment

Answer 3

Refers to the year to year fluctuations in unemployment around its natural rate.
Is associated with the short term ups and downs of the business cycle.

Question 4

Unemployment rate

Answer 4

Percentage of the labour force that is unemployed.

The labour force is the total number of people who could possibly be employed in the economy at any given point in time.

Question 5

How is unemployment measured.

Answer 5

1. The claimant count

2. Labour force surveys

Question 6

How long are the unemployed without work

Answer 6

Most spells of unemployment are short.
Most unemployment observed at any given time is long-term.
Most of the economy’s unemployment problem is attributable to relatively few workers who are jobless for long periods of time.

Question 7

Frictional Unemployment

Answer 7

Refers to the unemployment that results from the time that it takes to match workers with jobs. It takes time for workers to search for jobs that are best suit their tastes and skills.

Question 8

Structural unemployment

Answer 8

The unemployment that results because the number of jobs available in some labour markets is insufficient to provide a job for everyone who wants one.

Question 9

Theory of efficiency wages

Answer 9

Firm may prefer higher than equilibrium wages;

1. Worker health
2. Worker turnover
3. Worker effort
4. Worker quality