Unemployment and some BOP

Question 1

What is Frictional Unemployment?

Answer 1

• Short - term unemployment where workers are moving between jobs
• Not regarded as a serious problem, there will always be some
• Higher unemployment benefits = more time out of employment, more job info = less time searching for job

Question 2

What is Seasonal Unemployment?

Answer 2

• Some workers tend to work on a seasonal basis
• During undesirable seasons for their work, e.g winter. they may be laid off
• Little can be done to prevent as demand for labour varies in the year

Question 3

What is Structural Unemployment?

Answer 3

• When the demand for labour is less than its supply in an individual labour market economy

Question 4

What are examples of Structural Unemployment?

Answer 4

• Regional Unemployment, e.g North-South divide due to lack of mobility of factors of production
• Sectoral Unemployment, steel and shipbuilding industries declined in the UK
• Technological unemployment, workers may be put out of work by technology

Question 5

What is Cyclical / Demand-deficient Unemployment?

Answer 5

• Economies have business cycles, booms to recessions
• This type of unemployment occurs in a recession
• When there is insufficient aggregate demand in an economy for workers to get a job
• Capital is underutilised

Question 6

What is Real Wage Unemployment?

Answer 6

• Classical unemployment, real wages are stuck at a level above that needed reduce unemployment any further, wages are inflexible downwards

Question 7

What are Causes of Real Wage Unemployment?

Answer 7

• Minimum wages, employers may only be willing to take on more workers if they are paid less
• Welfare benefits may pay higher than certain jobs