Chapter 6 - Unemployment
Underemployment
"Overqualified"; working part-time but seeking full-time
Income Effects
"Price" to a buyer is "income" to a seller
Part-Time workers are considered:
"fully employed"
Unemployment Rate
# unemployed / # in LF
____ unemployed workers live in areas where jobs exist and they have marketable skills while ____ unemployed workers do not.
- Frictionally - Structurally
The labor force is the sum of the ____ and ____.
- employed - unemployed
Those who are working are defined as ____ (one word) and those who are not working but actively seeking work are defined as ____ (one word).
- employed - unemployed
Nations have varying official unemployment rates because they have different ____ rates of unemployment and they may be in different phases of their ____ cycles.
- natural - business
Benefits of outsourcing:
-Increased productivity -lower labor cost -eventual job growth -increased growth
Labor force growth
1.expense the production possibilities 2. Enables us to produce more output each year 3.Requires the creation of more jobs
Suppose the adult population in the country of Candora is 171 million. The number of adults in the labor force is 97 million, and the number of unemployed adults is 74 million. The labor force participation rate in Candora approximately equals _____.
56.73 percent
According to recent estimates of Okun's Law, each additional 3% change in unemployment translates into a
6% change in real output
If the number of people employed is 150,000 and the labor force is 160,000 the unemployment rate is:
6.25%
Measure of LABOR FORCE
= EMPLOYED + UNEMPLOYED
Seasonal Unemployment
A life guard is unemployed at the end of the summer
discouraged worker
An individual who isn't actively seeking employment but would look for or accept a job if one were available.
The unemployment rate is understated because:
Discouraged workers aren't counted as unemployed
Full employment is something less than 100 percent employment of the labor force because:
Economists say that the economy is "fully employed" when it is experiencing only frictional and structural unemployment
Hyperinflation refers to a period of extremely erratic inflation rates
FALSE extremely high inflation is called hyperinflation.
_____________ unemployed workers live in areas where jobs exist and they have necessary skills while, ___________ unemployed workers do not
Frictional, Structural
Construction workers at times face high rates of unemployment because their work is both seasonal and subject to wide swings over the business cycle.
TRUE
During periods of Inflation, the real value of a given amount of nominal dollars decreases.
TRUE
The type of unemployment that consists of workers searching or waiting for jobs is called ____ unemployment, while the unemployment that consists of workers who lack marketable skills or must relocate is called ____ unemployment and the type of unemployment that is caused by a decline in total spending is called ____ unemployment.
- Frictional - Structural - Cyclical
Unemployment caused by a mismatch between the skills or location of job seekers and the requirements or location of available jobs is called _________ unemployment
A structural
What is true about the labor force participation rates in the united States since the 1950's?
The rate of men has fallen ; the rate for woman has increased
Individuals who are involuntarily employed part time are said to be
Underemployed
By counting part time workers as fully employed, the economy's unemployment problem is
Understated
By not counting discouraged workers as unemployed, the BLS official unemployment rate is ___________.
Understated.
People who report that they are actively seeking a job even when they have little interest in finding employment are know as the...
phantom unemployed
Full employment..
Will always include some unemployment
The following group experiences high unemployment rates
blue collar workers
When GDP is increasing, both unemployment rates and average duration of unemployment...
decrease
Seasonal Unemployment
due to seasonal changes
New Jobs
The new jobs of tomorrow will require increasing levels of education and skill. And, new type skills no doubt.
unemployment rate
The percentage of the labor force that is unemployed
unemployment rate
The proportion of the labor force that is unemployed.
Cyclical Unemployment
lack of job openings; "recession-like" conditions
Full employment is ____ 100 percent employment of the labor force.
less than
Real Income
nominal income adjusted for inflation
Item Weight
the % of total expenditures spent on one item
Be not counting discouraged workers as unemployed, the BLS official unemployment rate is ____.
understated
Underemployed
workers represent labor resources that are not being fully utilized.
The official unemployment rate would be higher if it included the existence of hidden unemployment or individuals who are:
working part time but prefer full-time work.
Labor-participation rate
% of population working or seeking employment
The unemployment rate equals
((labor force - unemployed)/labor force) x 100
True or False: If a person is not employed but is actively seeking a job, he or she is counted as unemployed (a). True (b). False
(a). True
Which of the following explains why the BLS official unemployment rate could be understated?
- Part-time workers are considered fully employed - Discouraged workers are classified as "not in the labor force"
Rank the most cited stresses caused by unemployment from most to least cited:
1. increased family stress 2. postponed medical care 3. cut back spending on food 4. interrupted education 5. stop paying for child care
Consider an economy made up of 100 ppl, 60 whom hold jobs, 10 whom are looking for work, and 15 whom are retired. The number of unemployed persons is...
10
If the number of people employed is 11,000, there are currently 2,500 people unemployed and 3,000 people who are not in the labor force, what is the unemployment rate?
18.5% - The unemployment rate is the number of people unemployed divided by the number of people in the labor force 2500 divided by 13500 = 18.51%
According to recent estimates of Okun's Law, each additional 1% change in unemployment translates into a
2% change in real output as opposed to the original formulation of the same law
Frictional Unemployment
A new college grad is looking for their first job and is currently unemployed
Which group tends to have the highest unemployment rate in the United States?
African American Teenagers
The labor force is made up of ____________ and _____________.
Employed, Unemployed
The labor force is the sum of the __________ and _______.
Employed, unemployed
Those who are working are defined as _____________ and those who are not working but actively seeking work are defined as____________.
Employed, unemployed
Full-time students not employed who don't want to work are part of the labor force (T/F)
False
Individuals neither employed nor actively seeking a job are counted as:
Nonparticipants
Frictional Unemployment
People moving between jobs
Redistributed Effects of Inflation
Price effects, income effects, wealth effects
The nominal interest rate is determined in the market for loanable funds.
TRUE. The amount of money ppl are willing to lend increases as the interest rate rises, other things constant
Why did the unemployment rate drop from the early 1980s to 2000 in the United States?
The U.S. economy generated an additional 37 million jobs as it was growing.
labor force participation rate
The percentage of the working-age population working or seeking employment.
Macro Consequences
Uncertainty, speculation, bracket creep, deflation dangers (short-term)
Labor force
all persons age 16 or older working for pay or actively seeking employment
Inflation
an increase in the average level of prices of goods and services
Discouraged Worker
an unemployed worker no longer seeking work (usually because of numerous rejections)
Those who are working are defined as...
employed
The economy attains ____ when the unemployment rate equals the natural rate of unemployment.
full employment
The Bureau of Labor Statistics lists all part-time workers as:
fully employed
The official unemployment rate is understated because
it counts part-time workers as fully employed
The number of persons unemployed for long periods as a percentage of the labor force is much lower than:
the overall unemployment rate
Relative Price
the price of one good in comparison with the price of other goods
labor force
the total number of workers, both the employed and the unemployed (includes all person over sixteen who are either working for pay or actively seeking paid unemployment) People who are not employed or are not actively seeking work are not considered part of the labor force.
The unemployment rate can be most accurately described as the number of ____ (one word) divided by the labor force multiplied by 100.
unemployed
Frictional unemployment is:
Inevitable and in part desirable
According to recent estimates of Okun's law, each additional ______% change in unemployment translates into a_________ Percent change in real output, as opposed to the original formulation of the same law
One, two
The GDP Deflator
Reflects price changes and market responses to those price changes; usually gives us a lower inflation rate than the CPI
A lifeguard is on employed at the end of summer:
Seasonal unemployment
Cyclical Unemployment
The economy is in a downturn so many workers around the country are unemployed
natural rate of unemployment
The long-term rate of unemployment determined by structural forces in labor and product markets.
full employment
The lowest rate of unemployment compatible with price stability, variously estimated at between 4 percent and 6 percent unemployment.
The labor force is
The sum of the employed and unemployed.
The means by which the US Bureau of Labor Statistics determines who is employed and unemployed is a:
random survey of households
which of the following are normally very similar between men and women?
Unemployment rates
If the unemployment rate is below the full employment rate this will cause _____________ pressure
inflationary
Unemployment
is the inability of labor - force participants to find jobs
Phantom Unemployed
people that are counted as unemployed, but probably shouldn't be
Discouraged Workers
people who were looking for a job but gave up
The portion of unemployment that is due to the mismatch between skills and jobs is called:
structural
An auto worker in Michigan who loses his job because the company relocated the plant to another country is an example of:
structural employment
Which of the following is the correct formula for calculating the unemployment rate?
The number of unemployed, working-age people seeking work/The number of people in the labor force.
inflationary flashpoint
The rate of output at which inflationary pressures intensify; the point on the AS curve where slope increases sharply.
outsourcing
The relocation of production to foreign countries.
Which of the following is an example of structural unemployment?
The rise in the unemployment of horse trainers after the development of gasoline-powered automobiles.
On average, less-educated workers have higher ____ rates than workers with more education.
unemployment
On average, less-educated workers have higher ____ rates then workers with more education.
unemployment
Wealth Effects
"Assets"
"Natural" Rate of Unemployment
long-term unemployment rate comprised of structural & frictional components
If the phantom unemployed were excluded from the BLS monthly surveys, the official unemployment rate would be
lower
Labor Force Growth: (a). requires the creation of more jobs (b). enables us to produce more output each year (c). expands the production possibilities curve (d). always results in less unemployment
(a). requires the creation of more jobs (b). enables us to produce more output each year (c). expands the production possibilities curve
If an individual quit their job because they were not getting enough hours and is now unemployed, this individual's reason for unemployment is best classified as: (a). new entrant (b). Job leaver (c). reentrant (d). job loser
(b). Job leaver
Which of the following explains why the unemployment rate could be understated? (a). Discouraged workers are considered unemployed (b). Part-time workers are considered fully employed (c). Discouraged workers are classified as "not in the labor force" (d). Part-time workers are considered unemployed
(b). Part-time workers are considered fully employed (c). Discouraged workers are classified as "not in the labor force"
Okun's Law
1 percent more unemployment results in 2 percent less output
Three basic kinds of unemployment
1. Frictional Unemployment 2. Structural Unemployment 3. Cyclical Unemployment
Rank most cited stresses caused by unemployment:
1. Increase family stress 2. Postpond medical care 3. Reduced spending on food 4. Interrupted education 5. Discontinued child or elder care
Who would be not counted as unemployed in the official statics
1/ who stopped looking for work because he or she felt there were no jobs 2/ who did not seek work because she has no transportation 3/ who work only part time job but sought full-time employment ( notice; the 1st two were not in the labor force; and 3rd was employed)
Which of the following demographic groups in the United States reported the highest unemployment rate in 2012?
African American workers.
Which of the following is true of the labor force participation rate in the United States?
After World War II, the labor force participation rates for men and women have converged.
The number of persons unemployed for long periods as a percentage of the labor force is ____ the overall unemployment rate.
lower than
If the inflation rate in an economy is higher than expected, which of the following groups in the society would be most likely to gain?
Borrowers
frictional unemployment
Brief periods of unemployment experienced by people moving between jobs or into the labor market. .
Consensus among Economists says swings due to:
Changes in REAL levels of output and employment brought about by changes in levels of TOTAL SPENDING. Spending Businesses no longer produce at current level Output, employment and income fall In reverse... the opposite results.
Changes in unemployment that occur as the economy expands and contracts is called:
Cyclical unemployment
Did economy is in downturn so many workers around the country are unemployed
Cyclical unemployment
The economy attains the natural rate of unemployment when _______________ is absent
Cyclical unemployment
Unemployment attributable to a lack of job vacancies that is, to an in adequate level of aggregate demand is called
Cyclical unemployment
A worker who becomes frustrated and drops out of the labor force after unsuccessfully second employment for some time is defined as a _____________ worker.
Discouraged
A worker who, after unsuccessfully seeking employment for some time, becomes frustrated and drops out of the labor force is defined as a ___________ worker.
Discouraged Worker
Which of the following explains why the unemployment rate could be understated?
Discouraged are classified as not in the labor force and part time workers are considered fully employed
The Official unemployment rate under states the problem of unemployment because it does not count which of the following as unemployed?
Discouraged workers
the official unemployment rate understates the problem of unemployment because it does not count which of the following as unemployed?
Discouraged workers
A new college grad is looking for her first job and is currently unemployed
Frictional unemployment
_________ unemployed workers lives in areas where job exist and they have the necessary skills while ___________ unemployed workers do not
Frictional, structural
The Bureau of Labor Statistics or the Census Bureau lists all part-time workers as:
Fully Employed
Structural Unemployment
Furniture makers in Pennsylvania are unemployed because manufacturing facilities are moved to Indonesia
Labor force growth is caused by:
Immigration and population increase
Labor force growth is caused by
Immigration, population increases
If a person is not employed but is actively seeking a job, he or she is counted as
In the labor force, unemployed
Unemployed
Not employed but actively seeking a job
Their goal Congress has set for the unemployment rate ______________ the rate most economists accept as consistent with full employment
Is tougher lower than
Reasons for Unemployment
Job leavers, job losers, new entrant, reentrants
The labor force participation rate is calculated as
Labor force/working Age population
If the phantom unemployed were excluded from the BLS monthly surveys, the official unemployment rate would be
Lower
A decrease in a person's real wage necessarily means:
Lower purchasing power
Suppose the economy has a fictional unemployment rate of 3%, a structural unemployment rate of 2%, and a cyclical rate of 1.5%. In this case the economy is natural rate of unemployment is
Natural rate of unemployment consist of frictional and the structural unemployment which means 3+2 = 5 natural rate of unemployment
Okun's law
One percent more unemployment is estimated to equal 2 percent less output.
underemployment
People seeking full-time paid employment who work only part-time or are employed at jobs below their capability.
Match the worker to their type of unemployment
Seasonal - A lifeguard is unemployed at summer's end Frictional - A new college grad is looking for their first job and is currently unemployed. Structural - Furniture makers in PA are unemployed because the manufacturing facilities have moved to Indonesia Cyclical - The economy is in a downturn so many workers around the country are unemployed
If the official unemployment rate increases, from December to January because the Christmas season is over, we can conclude that...... is responsible for the increase.
Seasonal employment
A decrease in the demand for retail salespersons after Christmas and New Year can be categorized as:
Seasonal unemployment.
Types of Unemployment
Seasonal, Frictional, Structural, Cyclical
production possibilities
The alternative combinations of final goods and services that could be produced in a given period with all available resources and technology.
Frictional unemployment is inevitable and in part, desirable because:
many workers voluntarily moving between jobs leads to greater income for workers, better allocation of labor resources and a larger real GDP
The unemployment rate is calculated by dividing the number of _________ by the _________ times hundred
Unemployed, labor force
___________ is the inability of labor force participants to find jobs
Unemployment
cyclical unemployment
Unemployment attributable to a lack of job vacancies—that is, to an inadequate level of aggregate demand.
structural unemployment
Unemployment caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs.
Frictional unemployment is defined as:
Unemployment for workers who are searching for jobs or waiting to take jobs in the future
Discouraged workers are:
Workers who have dropped out of the labor force.
Real GDP =
[(nominal GDP) / GDP Deflator] * 100
When the economy is growing,
both unemployment rates and the average duration of unemployment decline.
Structural Unemployment
mismatch of skills & requirements of a job; mismatch of location
A worker who, after unsuccessfully seeking employment for some time, becomes frustrated and drops out of the labor force is defined as a ____ worker.
discouraged
The economy attains full employment when the unemployment rate:
equals the structural and frictional unemployment rate
The natural rate of unemployment:
equals the structural and frictional unemployment rates
Human Costs of Unemployment
family, stress, health
The economy needs some unemployment to operate efficiently because without it:
firms will find it difficult to recruit workers, leading to increased wages and prices
The Bureau of Labor Statistics or the Census Bureau lists all part-time workers as
fully employed
Full-employment
gauged by watching price signals; when resources become scarce, jump in price (4-6%) currently-5.1%
Workers in lower skilled occupations have ____ unemployment rates than workers in higher-skilled occupations.
higher
When GDP is decreasing, both unemployment rates and average duration of unemployment...
increase
Okun's Law
increase in unemployment by 1%, decrease in output by 2%
Frictional unemployment
is the brief periods of unemployment experienced by people moving between jobs or into the labor market.
unemployment
is the inability of labor force participants to find jobs
the official unemployment rate understates the problem of unemployment because
it counts part-time workers as fully employed
unemployment rate formula
number of unemployed/labor force x 100
The unemployment rates for men and women are normally:
similar
A glass blower who is unemployed because his skills are no longer marketable due to automation is an example of ____.
structural unemployment
Furniture makers in Pennsylvania are unemployed because the manufacturing facilities have moved to Indonesia
structural unemployment
CPI
"Consumer Price Index" - used to measure inflation
The unemployment rate equals:
(labor force - employed) / labor force
Labor force is calculated by:
(labor force)/(working-age population)
Which of the following could be considered a cost of unemployment?
- Higher crime, suicide and divorce rates - Severe psychological costs to the job loser - Wasted resources because a worker is not being utilized
Which of the following are characteristics of lower skilled workers?
- Longer spells of structural unemployment - Less likely to be self-employed
Human costs of unemployment
-Sever costs to the job loser -Losses in income -Decreased confidence levels
Labor force growth is caused by
-population increases -immigration -requires the creation of more jobs -expands the production possibilities curve -enable us to produce more output each year
Brief period of unemployment experienced by people moving between jobs or into the labor market is called ___________ unemployment
Frictional
If the unemployment rate is below the full employment rate, this will cause _________ pressure
Inflationary
Very low levels of unemployment tend to cause ____________ pressures.
Inflationary
The rate of output at which inflationary pressures intensify is called the:
Inflationary Flashpoint
individuals neither employed nor seeking employment are called:
Nonparticipants
Nominal Income
current prices
Changes in unemployment that occur as the economy expands and contracts is called:
cyclical unemployment
Economists say that the economy is at "full employment" when the:
cyclical unemployment rate is zero
the natural rate of unemployment is generally thought of as the
sum of the frictional unemployment and structural unemployment rates
Those who are not working but actively seeking work are defined as...
unemployed
The formula to determine the unemployment rate is:
unemployed divided by labor force times 100
The unemployment rate measures the:
Percentage of those in the labor force who are not working but are looking for work.
Those individuals who are counted as unemployed but are not actively seeking employment are known as _______ unemployed
Phantom Unemployed
How is unemployment measured?
- U.S. Census Bureau survey about 60, 000 households a month to determine how many people are actually unemployed. - A person is considered unemployed if he or she is not employed and is actively seeking a job.
Some of the benefits of outsourcing jobs include
- increased productivity - increased growth - lower labor costs - eventual job growth
On average, less educated workers have higher ____________ rates than workers with more education.
Unemployment
During periods when the inflation rate fluctuates widely..
uncertain about changes in relative prices causes a decrease in economic efficiency.
During periods when the inflation rate fluctates widely,...
uncertainty about changes in relative prices causes a decrease in economic efficiency.
Underemployment exists
when people seeking full-time paid employment, work only part time, or are employed at jobs below their capability.
How could one be underemployed?
...
Anne is an accountant who lost her job in the last recession and has given up looking for work after an unsuccessful job search. What is she?
A Discouraged Worker.
Bureau Labor Statistics determines Perimeters for unemployment Person over 16 are considered employed if :
- they worked at all for pay or profit even if for an hour - Worked 15 hours or more w/out pay in a family - operated enterprise - Have a job which they did not work during (survey week) due to illness, vacation , industrial disputes, bad weather , time off or personal reasons.
According to recent estimates of Okun's Law, each additional 3% change in unemployment translates into a __% change in real output. (a). 4 (b). 2 (c). 6 (d). 3
(c). 6
The labor force participation rate is calculated as:
(labor force)/(working-age population)
Which describes how to calculate the unemployment rate
(unemployed/labor force) x 100%
Frictional unemployment differs from other unemployment in three ways:
- Demand is there - Frictionally unemployed have the skills required - Job search relatively short
Person are considered unemployed if (during the survey week)
- Do not have a job - Are available for work - Have actively looked & looked for work during past four weeks (this requirement is very weak..)
what is full employment?
- Full employment is not the same as zero unemployment. - The economy strives to reach its potential which means that full employment is essential. When the actual rate of unemployment exceeds the natural rate, the actual output of the economy will fall below its potential. Resources are underutilized (inside production possibility curve.)
What happens if you can't find work..
- If unemployment persists... workers often give-up looking. - Discourage workers are not counted as part of the unemployment problem after they give up looking for a job. - Some people are forced to take any job available which means...no longer unemployed, but now "underemployed."
How long a person remains unemployed is affected by the nature of the joblessness.
- Job leavers - Job losers - Re- entrance - New entrance
OKUN'S Law
- Okun's Law - Arthur Okun quantified the relationship between the shortfall in real output and unemployment. - High unemployment in 1992 left the U.S. $240 billion short of its production possibilities — a loss of $920 of goods and services for every American. - Slow Growth.... - The economy must grow at least as fast as the labor force to avoid cyclical unemployment. - Relationship between the shortfall in output and unemployment. - When you have unemployment of any significance, your economy will have reduced output. Ratio accepted today is 1% of unemployment yields 2% less output. A 2/1ratio then allows economists to put a $$$ amount on the cost of unemployment to the economy.
An expansion in an economy is usually associated with:
A decline in unemployment in the economy.
Important economic fact:
As the economy gets close to FULL EMPLOYMENT It is more difficult to obtain further gains in REAL OUTPUT. Continued increasing levels of spending bring about INFLATION
Old Skills
As the skills gap widens, structural unemployment increases. The skills gap is the gap between skills required for emerging jobs and the skills of workers.
Brief periods of unemployment experienced by people moving between jobs or into the labor market is called __________ unemployment
Frictional unemployment
Countries Compare
Countries can assess the growth of other countries for means of: Foreign investment Trade potential Currency stabilization
_____ results in a better match between workers and jobs and improves the efficiency of an economy.
Frictional unemployment
After graduating from Harvard Law School, Anne started Looking for a job. She could not find a job after looking for one week. This is an example of what type of unemployment?
Frictional Unemployment
The labor force consists of:
People 16 years of age and older who are working or looking for work.
When GDP is decreasing, both unemployment rates and average duration of unemployment ________
Increase
A decrease in the interest rate, other things constant will...
Increase the quantity of loanable funds demanded
Measure of PARTICIPATION RATE
LABOR FORCE = ------------------------------------ ---------- x 100 POPULATION 16 YEARS OLDER
The _____ is the ratio of the number of people in the labor force to the total adult population.
Labor force participation rate
People out of work for 27 weeks or longer are said to be _____.
Long-term unemployed
What is true about U.S. History prior to the 1950's?
Major wars resulted in high inflation rates that were usually followed by deflation.
Natural Rate of Unemployment NARU
NARU = the difference between full employment and 100% employment. A level of unemployment that will not trigger inflation. i.e. this figure will not bid up wages. The natural rate of unemployment is not a temporary high or low... it is a rate that is sustainable into the future.
Cyclical unemployment implies that an economy is _____ its production possibilities frontier.
Operating inside
Depression Unemployment
Our greatest failure occurred during the Great Depression, when as much as one-fourth of the labor force was unemployed. The Historical Record Unemployment rates fell dramatically during World War II — the civilian unemployment rate reached a rock bottom 1.2 percent. Since 1950, unemployment rate has fluctuated from a low of 2.8 percent during the Korean War (1953) to a high of 10.8 percent during the 1981-82 recession.
Unemployment caused by a mismatch between the skills (or location) of available jobs is called __________ unemployment.
Structural unemployment
Policy makers and economists are mostly concerned about:
Structural unemployment because workers either have to develop skills required in the local job market or leave the market.
A reduction in the demand for labor caused by changes in technology, taxes, and competition is likely to result in:
Structural unemployment.
The Unemployment rate among African American workers in the United Sates is higher than that among white workers.
TRUE
Suppose Jane quit her job 4 weeks ago. She is currently looking for a job that matches her qualifications better. She has a few job offers she still hasn't accepted. Jane can be considered to be _____.
frictionally unemployed
Labor force in an a economy consists of all:
The civilian noninstitutional adult population that is either working or looking for work.
Frictional unemployment is caused by:
The time required to bring together employers and job seekers.
The unemployment rate among teenage workers in the United States is higher than those among other workers because:
They usually take unskilled jobs and are the first to be laid off when the economy slows down.
Measure of UNEMPLOYMENT RATE
UNEMPLOYED = ----------------------------------------- x 100 LABOR FORCE
think about that
Unemployment = 5% (NAtural Rate Unem) Unemployment = 8% (x 2 = 16% less production) Unemployment = 25% (depression era x 2) = 50% less production! Today (2009) = 9.7 x 2 =19.4% less
Discouraged workers
Workers who left the labor force because they could not find the jobs.
Suppose the nominal wages of workers in an economy increase by 7 percent while the price level rises by 5 Percent. The real wages
Would increase by 2 percent
The UNEMPLOYMENT RATE
is the proportion of the labor force that is unemployed number of unemployed pople rate = # of unemployment people -------------------------------------------- labor force
Cyclical unemployment
is the unemployment attributable to the lack of job vacancies - i.e., to an inadequate level of aggregate demand. Cyclical unemployment occurs when there are simply not enough jobs to go around. -ocurs during fluctuation in real GDP. Cyclical unemployment rises during period when real GDP falls or grows at a slower-normal rate decreases when the economy improves
Structural unemployment
is the unemployment caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs. Periods between jobs will be lengthened when the unemployed lack the skills that employers require.
Seasonal unemployment
is the unemployment due to seasonal changes in employment or labor supply. What would be an example? At the end of each season, thousands of workers must go searching for new jobs, experiencing seasonal unemployment in the process.
An increase in unemployment benefits is likely to ..
reduce a persons incentive to look for work.
