12 Questions
What is the main cause of structural unemployment?
Mismatch between available jobs and jobseekers' skills
Why might workers become unemployed due to structural factors?
Their skills are being automated by technology
How long does structural unemployment typically last compared to other types of unemployment?
More than 12 months
What is the primary impact of structural unemployment on wages and inflation?
Has no direct influence on wages or inflation
What is the main characteristic of frictional unemployment?
Results from job transitions and search times
When is frictional unemployment likely to occur?
At all points of the business cycle
What type of unemployment occurs with changes in economic activity over the business cycle?
Cyclical unemployment
Which factor leads to a lack of jobs during an economic downturn?
Shortfall of demand for goods and services
What is the nature of cyclical unemployment typically described as?
Medium term (one to 12 months)
During an economic downturn, what action might businesses take due to weaker demand?
Reduce the amount of people they employ
What can contribute to lower inflation when cyclical unemployment increases?
Lower wage increases by businesses
Which type of policy can help reduce cyclical unemployment?
Expansionary monetary policy to stimulate aggregate demand
Study Notes
Structural Unemployment
- The main cause of structural unemployment is a mismatch between the skills and locations of workers and the requirements of available jobs.
- Workers become unemployed due to structural factors when they lack the necessary skills or education to adapt to changes in the labor market or industry.
- Structural unemployment typically lasts longer than other types of unemployment, as it requires significant changes in the skills and training of workers.
Frictional Unemployment
- The main characteristic of frictional unemployment is that it is a temporary and voluntary type of unemployment, occurring when workers are transitioning between jobs.
- Frictional unemployment is likely to occur when workers are entering the labor market for the first time, switching careers, or moving to a new location.
Cyclical Unemployment
- Cyclical unemployment occurs with changes in economic activity over the business cycle, typically increasing during economic downturns and decreasing during economic upswings.
- A lack of jobs during an economic downturn is a key factor leading to cyclical unemployment.
- The nature of cyclical unemployment is typically described as fluctuating with the overall state of the economy.
- During an economic downturn, businesses might take action due to weaker demand, such as reducing production and laying off workers.
- Cyclical unemployment can contribute to lower inflation, as reduced consumer spending and lower production lead to lower prices.
- Fiscal policy can help reduce cyclical unemployment by increasing government spending and stimulating economic growth.
Learn about the three main types of unemployment: cyclical, structural, and frictional. Understand how these types can overlap and their significance in measuring unemployment rates.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
