Unemployment

Question 1

The working age population can be broken into two groups.

Answer 1

the active population and the inactive population.

Question 2

Working Age Population

Answer 2

People between the ages of 16 and 64.

Question 3

Active Population

Answer 3

People between the ages of 16 and 64 who are actively working or actively seeking work. Also called the workforce.

Question 4

Inactive Population

Answer 4

People between the ages of 16 and 64 who are neither actively working nor actively seeking work. This includes those who are unable to work.

Question 5

Whats another name for workforce

Answer 5

economically active population

Question 6

Unemployment

Answer 6

When somebody is able to work and actively seeking work but is not working.

Question 7

Unemployment Level

Answer 7

The number of people who are unemployed.

Question 8

Unemployment Rate

Answer 8

The number of unemployed people as a percentage of the economically active population.

Question 9

Unemployment Rate Formula

Answer 9

Unemployment rate = (Number of unemployed people/economically active population) x 100

Question 10

Employment Level

Answer 10

The number of people who are employed.

Question 11

Employment Rate

Answer 11

The number of employed people as a percentage of the working age population.

Question 12

Employment Rate Formula

Answer 12

Employment rate = (Number of employed people/working age population) x 100

Question 13

Activity Rate

Answer 13

The activity rate (or participation rate) is the number of economically active people as a percentage of the working age population.

Question 14

Activity Rate Formula

Answer 14

Activity Rate = (Number of Economically Active People/Working Age Population) x 100

Question 15

Why might the unemployment rate fall?

Answer 15

A decrease in the number of unemployed people or an increase in the economically active population

Question 16

How is the ILO labour force surveys held

Answer 16

80,000 households every quarter and asks whether anyone in the household has been out of work for 4 weeks and is ready to start work within the next 2 weeks.

Question 17

Explain the limitations of the ILO Labour Force Survey and the Claimant Count as measures of unemployment.

Answer 17

The Labour Force Survey asks 80,000 households out of 27 million in the UK. It is therefore possible that the sample used is not representative, which means that this method can lack accuracy.

The Claimant Count does not include people who are unemployed but do not claim unemployment related benefits. This includes people who are embarrassed to claim benefits or who have partner who is a high earner. This means that it underestimates the actual level of unemployment.

Question 18

Labour Force Survey

Answer 18

A survey to measure unemployment conducted by the International Labour Organisation.

Question 19

Claimant Count

Answer 19

A measure of unemployment which calculates the number of people claiming unemployment benefits.

Question 20

Underemployment

Answer 20

Underemployment is when workers are employed but working fewer hours than they want to or underusing their skills.

Question 21

Which of the following could occupational immobility lead to?

Answer 21

Occupational immobility means workers can’t find work because they lack the skills needed to move into new professions. This leads to structural unemployment: when unemployment is caused by a shift in industry e.g. the UK shifting from manual labour to services.

Question 22

How is Labour force survey held

Answer 22

80,000 households are interviewed and then surveyed on the phone every quarter to ask whether they are unemployed. In this survey, someone is considered as unemployed if they have been out of work for 4 weeks or more and are ready to start within the next 2 weeks and actively looking for work.

Question 23

Which of the following is a cause of structural unemployment?

Answer 23

If labour becomes less mobile then it is likely to cause structural unemployment.

Occupational immobility of labour occurs when people can’t get jobs because they lack the skills needed. This causes structural unemployment - as the industries in the UK change, people will become unemployed if their skills become irrelevant

Question 24

Occupational Immobility of Labour

Answer 24

When workers can’t move between different jobs because they lack the skills.

Question 25

Geographical Immobility of Labour

Answer 25

When workers can’t move between different jobs because they can’t move to a different location.

Question 26

Real Wage Unemployment

Answer 26

Real wage (or classical) unemployment occurs when wages are above the equilibrium wage creating an excess supply of labour.

Question 27

Cyclical Unemployment

Answer 27

Cyclical (or demand deficient) unemployment occurs when there is low aggregate demand in an economy and so firms reduce their derived demand for labour.

Question 28

Structural Unemployment

Answer 28

Structural unemployment occurs when the structure of the economy changes, shifting jobs from one sector or location to another and leaving immobile workers unemployed.

Question 29

Frictional Unemployment

Answer 29

Frictional unemployment occurs when people are temporarily unemployed while searching for a new job.

Question 30

Seasonal Unemployment

Answer 30

Seasonal unemployment occurs when people are unemployed during certain seasons.

Question 31

Which of the following shows what is meant by a Current Account equilibrium?

Answer 31

Total inflows equal total outflows

Question 32

Current Account Deficit

Answer 32

The Current Account is in deficit when outflows are greater than inflows and so it is a negative number.

Question 33

Current Account Surplus

Answer 33

The Current Account is in surplus when inflows are greater than outflows and so it is a positive number.

Question 34

Capital & Financial Account

Answer 34

The Capital & Financial Account is part of the Balance of Payments and tracks investments into, and out of, a country.

Question 35

Explain why the UK government would want to reduce the Current Account deficit and reach equilibrium.

Answer 35

A Current Account deficit always needs to be balanced by a Capital & Financial Account surplus. A Capital & Financial Account surplus means that foreign investors are investing in UK assets such as buying shares or property. Any profit from these investments will then be sent overseas to those foreign investors meaning even more money is withdrawn from the UK economy. By reducing a Current Account deficit, the Capital & Financial Account surplus will be smaller. This means that there will be less foreign investment and so less future earnings leaking out of the economy.

Question 36

Hysteresis

Answer 36

long term unemployed workers lose their motor skills and suffer from mental health issues like depression