Economics unit 4 - Unemployment

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What are the main causes of unemployment? (5)
Frictional, Seasonal, Structural, Classical, Demand-deficient
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What is frictional unemployment?
Occurs when people are between jobs
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What is seasonal unemployment?
Occurs from seasonal fluctuation in the demand for labour
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What is structural unemployment?
Occurs from the decline of certain industries. Workers often do not have the skills required to find a new job
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What is classical unemployment?
Occurs when the real wage rate is too high
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What is demand-deficient unemployment?
Occurs when there is a lack of aggregate demand
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What are 3 consequences of unemployment?
Low standard of living, Waste of human capital, Higher spending on unemployment related benefits
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What is the natural rate of unemployment?
The difference between those who are able and willing to work and those who want to work
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At what point on a graph can the natural rate of unemployment be found?
Where the LRPC intersects the unemployment axis on a PC diagram
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What are the 5 factors that determine the natural rate of unemployment?
Availability of job information, Skills and education, Degree of labour mobility, Flexibility of labour market, Hysteresis
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What does the SRPC show?
An inverse relationship (trade-off) between the rate of inflation and the rate of unemployment
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(LRPC) If workers bid up their wages in nominal terms, what will happen?
The economy will move back to the original starting position
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(LRPC) If workers bid up their wages in real terms, what will happen?
The economy will move horizontal to join the LRPC, and a new SRPC will be drawn
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What does NAIRU stand for?
Non acceleration inflation rate of unemployment
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What are the demand-side policies to reduce unemployment?
Increase AD
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What are the supply-side policies to reduce unemployment?
Increase education/training, Reduce occupation mobility of labour
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What are the 2 methods of measuring unemployment?
Claiment count, The labour force survey
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Other cards in this set

Card 2

Front

What is frictional unemployment?

Back

Occurs when people are between jobs

Card 3

Front

What is seasonal unemployment?

Back

Preview of the front of card 3

Card 4

Front

What is structural unemployment?

Back

Preview of the front of card 4

Card 5

Front

What is classical unemployment?

Back

Preview of the front of card 5
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