Unemployment and business cycles (start of Chapter 9, start of Chapter 14)

Question 1

labour force

Answer 1

• total number of employed and unemployed adult workers

Question 2

participation rate

Answer 2

• per cent of adult population that is int he labour force

Question 3

unemployment rate (UER)

Answer 3

• per cent of labour force that is unemployed

= unemployed / labour force x 100

Question 4

cost of unemployment

Answer 4

• social problems
• costs of social assistance
• deadweight loss

Question 5

frictional unemployment

Answer 5

• results from time it takes for workers to search for jobs that best suit their tasks and/or skills.
• search/wait unemployment
• occurs regardless of economic conditions
• generally voluntary
• includes seasonal unemployment

Question 6

structural unemployment

Answer 6

• results from mismatch between unemployed workers and available jobs, due to:
• changes in technology
• competition
• labour immobility

Question 7

natural rate of unemployment

Answer 7

• the unemployment rate (UER) to which the economy tends towards in a long run equilibrium
• corresponds to the concept of full employment
  = frictional + structural
• number of available jobs equals number of unemployed

Question 8

cyclical unemployment (deficient demand)

Answer 8

• number of available jobs is less than the number of unemployed

Question 9

policies to reduce frictional unemployment

Answer 9

• improve information available to job seekers/employers

- reduce social assistance

Question 10

policies to reduce structural unemployment

Answer 10

• retraining programs

- relocation assistance

Question 11

policies to reduce cyclical unemployment

Answer 11

• expansionary fiscal and monetary policy

Question 12

business cycles

Answer 12

• continual fluctuations around long term growth trend in economy

Question 13

business cycles are irregular and unpredictable, each cycle varies in terms of:

Answer 13

• duration
• magnitude
• diffusion

Question 14

trough (T)

Answer 14

• bottom of a business cycle
• above average unemployment of labour
• unused industrial capacity
• low expectations

Question 15

depression (D)

Answer 15

• widespread, deep trough of long duration

- ex: Great Depression, 20-40% UER for all of the 1930s.

Question 16

expansion (E)

Answer 16

• real GDP increasing
• workout machinery replaced
• employment increases, income increases, momentum
• optimistic expectations

Question 17

peak (P)

Answer 17

• top of business cycle
• shortage of factors
• shortage of money
• expectations changing / changed

Question 18

boom (B)

Answer 18

• peak where unemployment rate (UER) is less than the natural rate
• accelerating/ high inflation

Question 19

recession (R)

Answer 19

• decreasing real GDP
• prices rise, demand falls
• layoffs, lower incomes, momentum
• pessimistic expectations

Question 20

business cycle causes

Answer 20

• changes in “G” (government) - stable, except during wartime
• changes in “C” (consumption) - stable, except for durable goods
• changes in “X” (exports) - more important, the smaller the economy
• changes in “I” (investments) - volatile/postponable

Question 21

staple product

Answer 21

• commodity on which the economy of a settlement concentrates much of its capital and labour

Question 22

theory of Canadian economic history

Answer 22

• cod and timber
• fur trade
• grain - National Policy
• timber, oil and gas, grain, minerals, etc