Y12 Booklet 3: Economic Growth & Unemployment Flashcards
(29 cards)
What are the 4 major macroeconomic objectives?
- (C) stable balance of payments on Current account
- (U) minimise Unemployment
- (P) Price stability
- (S) Sustainable economic growth
How can Long-Run Economic Growth be achieved? Examples?
increase productive capacity of economy
- increased investment (Cap)
- discover new resources (Lan)
- train labour force (Lab)
How can Short-Run Economic Growth be achieved? Examples?
increase output of economy
- using more available machines
- using more existing resources
How can Long-Run Economic Growth be shown on a diagram?
1) AD/AS diagram (shift right of LRAS)
2) PPF diagram (shift right of PPF)
How can Short-Run Economic Growth be shown on a diagram?
1) AD/AS diagram (shift right of AD)
2) PPF diagram (shift right inside PPF)
What are the benefits of economic growth?
Households - AD grows, D for Labour increases, so wages grow and Qual of Life increases
Firms - Profits grow, so Investment can increase, competitive advantage
Govts. - incomes increase so tax revenue increase, and cost of social care falls
What is the definition of unemployment?
when a person does not have a job, but is actively seeking work at the prevailing market wage rate
How can unemployment be measured?
Claimant Count
Labour Force Survey (LFS)
How does the Claimant Count method measure unemployment? Cons?
measures no. people currently claiming Jobseeker’s Allowance (JSA), a type of benefit for those unemployed and seeking work
- may have savings or people to financially support them, don’t need JSA
- may expect new job very soon
- may be reluctant to claim due to social stigma or pride
How does the Labour Force Survey method measure unemployment? Pros/cons?
a survey which measures no. people unemployed in 60,000 and extrapolates out to population
+ by International Labour Office, so internationally comparable
- small sample size, extrapolations may be innaccurate
What is the definition of economically inactive? Examples?
when a person does not have a job, and is not seeking work
- stay at home parents
- disabled/long-term sick/carers
- early retired
What is the definition of underemployment? Examples?
when a person has a job, but do not maximise their human capital
- working less hours than desired
- not utilising their skills
What is the Potential Labour Force? (Population of Working Age)
Employed + Unemployed + Economically Inactive
What is the Actual Labour Force? (Economically Active)
Employed + Unemployed
What is the Activity/Participation Rate?
Actual Labour Force / Entire Population
What are the 6 types of unemployment?
- Frictional (Job-Search)
- Seasonal
- Structural
- Technological
- Cyclical (Keynesian/Demand-deficient)
- Classical (Real-wage)
What is Frictional (Job-Search) Unemployment?
when people are between jobs or recently economically active
e.g. recent graduates
What is Seasonal Unemployment? How can it be solved?
when demand for labour only exists at certain times of year
e.g. agriculture (harvests), Santa
improve mobility of labour
What is Structural Unemployment? How can it be solved?
when demand for labour changes due to changes in output or structure of an economy
e.g. miners
training in transferrable skills
What is Technological Unemployment?
a subcategory of structural unemployment, when demand for labour changes due to mechanisation (workers being replaced by machines)
What is Cyclical (Keynesian/Demand-deficient) Unemployment? Diagram?
when a fall in AD (often in a recession) causes fall in outputs and a lack of derived demand for labour
What is Classical (Real-wage) Unemployment?
when wages are too high for a labour market to reach equilibrium (meaning people are unable to work for lower wages that they’d be willing to)
What is usually the cause of unemployment? What are the 2 types?
immobility of labour
geographical and occupational
What is geographical immobility of labour? What can cause it?
when workers can not relocate to where there is demand for labour
financial cost, social obligations, regional/cultural differences
