3.2 Low Unemployemnt

Question 1

Unemployment definition

Answer 1

Where people in the labour force, who are willing and able to work at the current wage rate, are unable to find employment

Question 2

Employment definition

Answer 2

The use of labour in the economy to produce goods and services

Question 3

Government objective employment

Answer 3

Low level and rate of unemployment and a high level and rate of employment

Question 4

Calculate unemployment rate

Answer 4

Rate of unemployment = level of unemployment/ total workforce x 100

Question 5

Measuring unemployment

Answer 5

The claimant count:
- measure of the amount of people claiming unemployment related benefits

Question 6

Types of unemployment

Answer 6

• cyclical unemployment
• structural unemployment
• frictional unemployment
• seasonal unemployment

Question 7

Cyclical unemployment

Answer 7

Caused by low levels of aggregate demand, leads to reduced demand for labour

Question 8

Structural unemployment

Answer 8

• caused by changes in the structure of the economy, e.g decline in the manufacturing sector, can be caused by a reduction in demand for a particular good or service

Question 9

Frictional unemployment

Answer 9

When workers are looking for jobs, short-term type of employment

Question 10

Seasonal unemployment

Answer 10

Caused by seasonal variation of demand in certain industries e.g tourism, agriculture

Question 11

Costs of unemployment to individuals

Answer 11

• loss of income, wages are usually higher than benefit payments, leads to lower standard of living - eval depends on levels of benefit that government provides
• decrease in human capital workers who are not in work will lose there skills, less employable
• cost to taxpayers, higher levels of unemployment leads to government having to pay more benefits, also less people paying income tax, people who are working will need to pay a higher level of income tax

Question 12

Costs of unemployment to goverment

Answer 12

• the economy produces below it’s productive capacity, as all labour is not being fully utilised, leading to decreased output
• potential budget deficit, higher levels of benefit payouts, and reduced income tax
• unemployment leads to more unemployment, household incomes decrease due to unemployment, leads to decreased demand for goods and service, causing fall in output, and further decrease in demand for labour

Question 13

Costs of unemployment to regions

Answer 13

• a decrease in the regional standard of living, due to a cycle of unemployment causing local businesses to close

Question 14

Benefits of unemployment

Answer 14

Generally unemployment is bad however:

• availability of workers to high demand industries
• decrease in wages, due to large supply for labour, reduction in costs for firms
• enables firms to more price competitive

Question 15

Evaluating the Costs of unemployment

Answer 15

Depends on the:

• type/cause of unemployment
• the size of unemployment
• the duration of employment
• the level of occupational and geographic mobility in an economy