Podcast
Questions and Answers
What is considered a key objective of macroeconomic stability?
What is considered a key objective of macroeconomic stability?
- Low and stable rate of inflation (correct)
- High unemployment rate
- Rapid economic growth
- Increasing income disparity
How is the unemployment rate calculated?
How is the unemployment rate calculated?
- (Number of unemployed / total population) x 100
- (Number of unemployed / total labour force) x 100 (correct)
- (Number of employed / total labour force) x 100
- (Total labour force / Number of unemployed) x 100
Which of the following is NOT a consequence of high unemployment?
Which of the following is NOT a consequence of high unemployment?
- Increased tax revenue (correct)
- Loss of GDP
- Increased crime rates
- Increased stress levels
What is cyclical unemployment primarily associated with?
What is cyclical unemployment primarily associated with?
Frictional unemployment occurs during which situation?
Frictional unemployment occurs during which situation?
Which of the following is a recommended solution to reduce structural unemployment?
Which of the following is a recommended solution to reduce structural unemployment?
What does equilibrium unemployment typically include?
What does equilibrium unemployment typically include?
A disadvantage in measuring unemployment includes which of the following?
A disadvantage in measuring unemployment includes which of the following?
Flashcards
Cyclical Unemployment
Cyclical Unemployment
A type of unemployment that occurs due to a lack of aggregate demand in the economy, leading to a recessionary gap.
Structural Unemployment
Structural Unemployment
Unemployment caused by factors that prevent workers from finding jobs even when there are job vacancies available, such as a mismatch between worker skills and employer needs, or geographic barriers to employment.
Equilibrium (Natural) Unemployment
Equilibrium (Natural) Unemployment
The unemployment rate that exists even when the economy is at full potential output. It includes frictional, structural, and seasonal unemployment.
Stagflation
Stagflation
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Frictional Unemployment
Frictional Unemployment
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Structural Unemployment
Structural Unemployment
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Seasonal Unemployment
Seasonal Unemployment
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Real Wage Unemployment
Real Wage Unemployment
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Study Notes
Macroeconomic Objectives
- Stable inflation rate
- Stable unemployment rate
- Steady economic growth
- Equitable income distribution
Unemployment
- Defined as individuals actively seeking work but unable to find employment within the labor force.
- Calculation: (Number of unemployed / Total labor force) x 100
- Labor force comprises working-age individuals actively seeking employment
Measuring Unemployment: Difficulties
- Hidden unemployment: Individuals not officially counted (e.g., stay-at-home parents, those working informally).
- Discouraged workers: Individuals who have stopped actively searching for work due to lack of prospects.
- Underemployment: Individuals working part-time or in jobs below their qualifications.
- Disparities: Differences in unemployment rates based on demographic factors (gender, ethnicity) are not adequately addressed.
Consequences of Unemployment
- Reduced GDP
- Lower tax revenue
- Increased social costs (welfare, healthcare)
- Loss of income
- Increased income inequality
- Higher crime rates
- Increased stress levels
- Higher rates of indebtedness and homelessness
Disequilibrium Unemployment (Cyclical)
- Occurs during recessions or periods of insufficient aggregate demand (AD).
- Characterized by a recessionary gap.
- Stagflation is a possible outcome that combines unemployment and inflation.
- Solution: expansionary fiscal policy (e.g., tax cuts, increased government spending) or monetary policy (lower interest rates) to stimulate aggregate demand.
Equilibrium Unemployment
- A natural level of unemployment that always exists within an economy, regardless of macroeconomic conditions.
- Includes frictional, structural, and seasonal unemployment.
Frictional Unemployment
- Workers between jobs or newly entering the labor market.
- Solutions: Reduce unemployment benefits, create more efficient job placement services, streamlined hiring/firing procedures
Structural Unemployment
- Results from a mismatch between available jobs and the skills of the labor force.
- Solutions: Improve educational programs, adult training programs, increase labor mobility, improving labor market information
Seasonal Unemployment
- Occurs due to cyclical factors depending on seasons, or other conditions.
Real Wage Unemployment (Implied)
- The minimum wage can contribute to unemployment by increasing labor costs and discouraging hiring.
Labour Market Graph
- Demand for products influences the demand for labor
- The supply of labor depends on factors like population and skills.
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Description
Explore the key concepts of unemployment within macroeconomic objectives. This quiz covers definitions, measurement difficulties, consequences, and implications on economic stability. Test your understanding of how unemployment affects the economy.
