Unit 3

Question 1

What is unemployment

Answer 1

number of people who do not have a job and currently looking for a job

Question 2

What is the labour force

Answer 2

All the people who are working / able to work
sum of employment and unemployment

Question 3

What is the labour force participation rate

Answer 3

percentage of population in the labour force

Question 4

What are discouraged workers

Answer 4

non-working people who have given up looking for a job because of the state of the job market

Question 5

What are marginally attached workers

Answer 5

would like to be employed but are currently not looking for a job

Question 6

What is underemployment

Answer 6

number of people who work part-time because they can not work full time

Question 7

What is frictional unemployment

Answer 7

unemployment due to the time people spend in job search

Question 8

What is cyclical unemployment

Answer 8

unemployment caused by a recent temporary setback in the economy

Question 9

What is structural unemployment

Answer 9

unemployment as the result of more people seeking jobs in a labour market than jobs available as the current wage

Question 10

What causes structural unemployment

Answer 10

Minimum wage
Unions - by bargaining for all a firms workers collectively they can often get higher wages
Efficiency wages - wages employers set above equilibrium wage rate as an incentive for better performance

Question 11

What is the natural rate of unemployment

Answer 11

the rate at which unemployment sits around normally

Question 12

What is natural unemployment

Answer 12

Frictional unemployment +structural unemployment
Cyclical unemployment is a deviation in the actual rate of unemployment from the natural rate

Question 13

What is actual unemployment

Answer 13

natural unemployment + cyclical unemployment

Question 14

What causes changes in the natural rate of unemployment

Answer 14

Changes in characteristics such as demographics, changes in labour market institutions, changes in gov policies

Question 15

What is the rule of 70

Answer 15

The rule of 70 states that 70 divided by the constant growth rate is the time it takes for the quantity to double
E.g. at 5% annually it would take 14 years (70/5=14)

Question 16

What is labour productivity

Answer 16

output per worker

Question 17

What can growth be attributed too

Answer 17

Increase in physical capital
Increase in human capital
Technological progression

Question 18

What is growth accounting

Answer 18

Estimates the contribution to economic growth of each major factor in the aggregate production function
You can measure the rates of growth of physical capital per worker and of human capital

Question 19

What is the aggregate production function

Answer 19

A hypothetical function that shows how productivity depends on the quantities of physical capital per worker and human capital per worker as well as the state of technology (T)

Question 20

What are factors that affect economic growth

Answer 20

savings and investment spending
education
research and development

Question 21

How are growth and inequality linked

Answer 21

Historically, rising GDP per capita has translated into real income for most people, recently in countries such as the US a growing share of income has gone to a relatively small number of people at the top of the income distribution

Question 22

What is the convergence hypothesis

Answer 22

International differences in real GDP per capita should narrow over time
It holds true among countries with similar characteristics

Question 23

What are challenges of long run growth

Answer 23

Reduced amount of natural resources
can lead to high levels of resource scarcity

Question 24

What government action can help the issues associated with long run growth

Answer 24

Carbon tax
Cap and trade systems - total emissions is capped and producers must buy licences to emit greenhouse gases
Incentives for innovation in clean energy sources

Question 25

What is the unemployment rate

Answer 25

Is the percentage of the total
number of people in the labour force who are unemployed

Question 26

What is diminishing returns to physical capital

Answer 26

holding fixed the amount of human capital per worker and the state of technology, each successive increase in the amount of physical capital per worker leads to a smaller increase in output per worker (productivity).

Question 27

What is the governments role in economic growth

Answer 27

Gov policies
Protection of property rights
political stability and good governance