Labour Market & Economic Growth (Chapter 15 & 17) ECO1006F

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Questions and Answers

What is the definition of the working-age population?

The total number of people between 15 and 64 years old (correct)

The total number of people who are unemployed

The total number of people who are employed

The total number of people between 18 and 65 years old

What is the labour force composed of?

The total number of people employed plus the number of unemployed (correct)

The total number of people who are not working

The total number of people unemployed

The total number of people employed

What is the definition of an employed person?

People who are aged 15–64 years who did not work at all during the reference week

People who are aged 15–64 years who, during the reference week, did any work for at least one hour (correct)

People who are aged 15–64 years and are actively looking for work

People who are aged 15–64 years and are not working but want to work

What is the main difference between the broad and official definition of unemployment?

The broad definition is more inclusive than the official definition Signup and view all the answers

What is the relationship between the labour market and real GDP?

The labour market and real GDP are closely linked, with changes in one affecting the other Signup and view all the answers

What is the main goal of policies that aim to increase economic growth?

To increase the productivity of the workforce Signup and view all the answers

What is the age range of people considered part of the working-age population according to StatsSA?

15-64 years Signup and view all the answers

Which of the following is NOT a requirement for someone to be considered unemployed according to the Official Unemployment definition?

Working at least 30 hours a week Signup and view all the answers

What is the main difference between the Broad Unemployment definition and the Official Unemployment definition?

The inclusion of discouraged workseekers Signup and view all the answers

According to the Official Unemployment definition, what is a requirement for someone to be considered unemployed if they have not actively looked for work?

They must have a job or business to start at a definite date in the future Signup and view all the answers

What is the term for someone who is discouraged from looking for work?

Discouraged workseeker Signup and view all the answers

Which definition of unemployment is considered narrower?

Official Unemployment definition Signup and view all the answers

What is the effect of an increase in the real wage rate on the natural unemployment rate?

It increases the natural unemployment rate Signup and view all the answers

What is the effect of unemployment benefits on the natural unemployment rate?

They increase the natural unemployment rate Signup and view all the answers

What is the relationship between the unemployment rate and real GDP?

When the unemployment rate is above the natural rate, real GDP is below potential GDP Signup and view all the answers

What is the output gap?

The difference between real GDP and potential GDP, expressed as a percentage of potential GDP Signup and view all the answers

How does an economy with a young population affect the natural unemployment rate?

It increases the natural unemployment rate due to a high level of frictional unemployment Signup and view all the answers

What is the definition of potential GDP?

The value of real GDP when the economy is at full employment Signup and view all the answers

Study Notes

Labour Market Indicators

The working-age population is the total number of people between 15 and 64 years old.
The labour force is the total number of people employed plus the number of unemployed.
Employed individuals are those who are aged 15-64 years, did any work for at least one hour, or had a job or business but were not at work.

Unemployment Definition

Unemployment definitions vary slightly between countries, but most use the same general definition.
The two main categories of unemployment definitions are Official (Narrow) Unemployment and Extended (Broad) Unemployment.

Official (Narrow) Unemployment Definition

Unemployed persons are those aged 15-64 years, not employed in the reference week, actively looking for work or trying to start a business in the four weeks preceding the survey interview, and available for work.
Or, those who had not actively looked for work in the past four weeks but had a job or business to start at a definite date in the future and were available.

Extended (Broad) Unemployment Definition

Unemployed persons are those aged 15-64 years, not employed in the reference week, and available to work but did not look for work because they are discouraged from looking for work.

Influences on Natural Unemployment

The age distribution of the population affects natural unemployment, with a young population having a high level of frictional unemployment and an ageing population having a low level.
The real wage rate influences natural unemployment, with a rate above the market equilibrium level creating a surplus of labour and increasing the natural unemployment rate.
Unemployment benefits increase the natural unemployment rate by lowering the opportunity cost of job search.

Unemployment and Real GDP

The unemployment rate fluctuates around the natural unemployment rate, causing real GDP to fluctuate around potential GDP.
When the unemployment rate is above the natural rate, real GDP is below potential GDP.
When the unemployment rate is below the natural unemployment rate, real GDP is above potential GDP.

Output Gap

The output gap equals real GDP minus potential GDP, expressed as a percentage of potential GDP.

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Description

Test your understanding of labour market indicators, types of unemployment, and the link between unemployment and real GDP. Assess your knowledge of labour demand and supply, and the sources of economic growth. Review the key concepts from Chapter 15 and 17 of ECO1006F.