Unemployment - Macro

Question 1

What is unemployment?

Answer 1

The number of people in the labour force that are unemployed

Question 2

What are the two main methods used to calculate unemployment?

Answer 2

1. Claimant count
2. Labour force survey

Question 3

What does the claimant count do?

Answer 3

Tracks the number of people claiming Job Seekers Allowance

Question 4

What are the the advantages of using the claimant count to measure unemployment?

Answer 4

• cheap
• easy to collect data (as it is computerised)
• can be updated regularly

Question 5

What are the disadvantages of using the claimant count to measure unemployment?

Answer 5

• generally underestimates the number of unemployed people because not everyone claims unemployment benefits
• because the allowance is controlled by the government, figures are easily manipulated eg if the government makes it more difficult to claim

Question 6

What is the labour force survey?

Answer 6

A survey sent around households which asks is people are employed and actively seeking work

Question 7

What are the advantages of using the labour force survey to measure unemployment?

Answer 7

• more accurate as data is being collected from real people, not a machine
• internationally acceptable measure of unemployment therefore data can be compared globally

Question 8

What are the disadvantages of using the labour force survey to measure unemployment?

Answer 8

• expensive
• time consuming
• only updated annually
• not entirely representative of the entire population as you can’t sample the whole population

Question 9

Why is unemployment an issue?

Answer 9

• restricts the output and income an economy can produce: leads to less spending
• leads to unused capacity: makes the economy productively inefficient
• more unemployment benefits will be needed- costing the taxpayer more money

Question 10

What are the four types of unemployment?

Answer 10

• frictional
• seasonal
• structural
• cyclical

Question 11

What is frictional unemployment?

Answer 11

When people are in between jobs

Question 12

What is seasonal unemployment?

Answer 12

When demand within certain industries spikes at different times of the year

Question 13

What is structural unemployment?

Answer 13

When the skills demanded (within the economy) and skills available do not match
- when industries go into decline, the workers may not be able to find transferrable goals

Question 14

What is cyclical unemployment?

Answer 14

When fluctuations in the economic cycle leads to periods of higher unemployment and periods of excess employment
- demand for labour is derived

Question 15

What is derived demand?

Answer 15

The demand of a commodity, service etc that is the result of the demand of something else

Question 16

What is a commodity?

Answer 16

A raw material e.g copper, wheat, cattle

Question 17

Why does the government want to keep unemployment low?

Answer 17

• key macroeconomic objective
• the public assesses the government by levels of unemployment
• the benefit of high levels of employment has a positive effect on gdp (if there are more people producing, output will increase)

Question 18

What are the 6 main policies that can combat unemployment?

Answer 18

1. Expansionary demand-side policy
2. Job training schemes
3. Reforms to the tax and welfare system
4. Reducing the geographical immobility
5. Apprenticeship schemes
6. Education

Question 19

How can expansionary demand-side policies help reduce unemployment?

Answer 19

Will help reduce cyclical unemployment by causing an increase in aggregate demand e.g reduction in tax

Question 20

How can job training schemes combat unemployment?

Answer 20

• tries to improve the skills of the current labour force so that over time they are more productive
• therefore they can produce more
• will reduce structural unemployment as people will be more employable

Question 21

How can reforms to the tax and welfare systems help reduce unemployment?

Answer 21

• reducing taxes
• making claiming welfare benefits less attractive, people become incentivised to supply their labour

Question 22

How can reducing geographical immobility help combat unemployment?

Answer 22

Policies that improve transport will help people get to work in further places and faster so more people will apply for more jobs

Question 23

How can apprenticeship schemes help combat unemployment?

Answer 23

Provides a specific skill set in which people can specialise and hence market themselves

Question 24

How can education help combat unemployment?

Answer 24

Leads to better educated people with more skills
- reforms to the education system
- making public money go further, building schools, higher teaching standards