MACROECONOMICS - unemployment

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what is the working age population ?
ages 16-64
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what is meant by inactive population
people of working age who are not able or not actively seeking work they are economically inactive
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define unemployment
people who are able to work and are actively seeking work but are not current working
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how do you calculate unemployment rate
number of unemployed ppl / active population x 100 = %
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what is the unemployment level
number of people unemployed
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how do you calculate the employment rate
employment level / working age population x 100
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how do you calculate the unemployment rate
unemployment level / active population x 100
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whats the difference between the unemployment rate and the employment rate
unemployment rate is the % of ppl unemployed whereas the employment rate is he % of ppl who are in employment
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what is the active rate
aka the participation rate - tells us what % of the working age population are actually working calculated by active population / working age population x100 to get a %
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what is the active population
active pop = num of employed ppl + num of unemployed ppl
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what are 2 reasons why the employment rate might fall ?
employment rate = num of employed ppl / working age population x 100
1. decrease in num of employed ppl
2. increase in the working age population
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2 reasons why the unemployment rate might fall
unemployment rate = num of unemployed ppl / active population x 100
1. decrease in num of unemployed ppl
2. increase in the economically active population
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if the unemployment level increases by 10 million what will happen to the employment level?
its impossible to tell without more info , num of unemployed couldve increased bc of immigration or bc ppl who were inactive decided to start working these can both increase unemployment withoit affecting employment
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an increase in the employment rate will be due to what ?
an increase in the number of employed people or a decrease in the working age population
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what are the two things used to measure unemployment ?
1. ILO labour force survey
2. claimant count
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explain the ILO labour force survey
80,000 households are interviewed and then surveyed on the phone every quarter to ask whether they are unemployed. in this survey u r considered unemployed if been out of work for 4 weeks or more n r ready to work within next 2 weeks n actively looking fo
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what does the claimant count measure ?
how many people are claiming unemployment benefits eg job seeker allowance eg if 1.4 million ppl were claiming unemployment benefits the CC would say 1.4 million ppl are unemployed
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what are the limitations of labour force survey ?
- 80,000 households isn't all households - inaccurate estimation of unemployment across the UK - 27 million households in the UK
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what is the limitation of using the claimant count to measure unemployment ?
- not everyone who is unemployed claims benefits, - stigma around unemployment - job centre n lots of forms+ if unemployed but partner is a high earner, ur not allowed to claim benefits - so unemployment will be underestimated
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what does the UK government use as the official measure of unemployment
ILO labour force survey
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what are the 5 types of unemployment ?
1. classical / real wage unemployment
2. cyclical unemployment
3. structural unemployment
4. frictional unemployment
5. seasonal unemployment
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how is real wage unemployment shown on a labour market diagram ?
when the wage is ABOVE the equilibrium, means that there is high supply of labour but low demand which creates excess supply of labour aka unemployment
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what are the axis on a labour market diagram ?
like a micro supply and demand diagram so S and D curves
on the vertical axis there is 'wage' and on the horizontal axis it is quantity of labour Ql
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why does real wage / classical unemployment occur ?
because the wage is higher then the equilibrium wage - creates excess supply of labour which is unemployment
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why would the wage stay at W1 (above the equilibrium) instead of decreasing back down to wage equilibrium so there's no excess supply of labour ?
the government has made it illegal to pay workers the equilibrium wage - if the gov sets a NMW above equilibirum its illegal for firms to pay less then this wage so will remain stuck at w1 where there is more supply of labour then D
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what are 2 reasons why the wage might be above equilibirum (real wage / classical unemployment )
1.Gov may have set a NMW so its ilegal for firms to pay less
2. power of trade unions can push wages above equilibrium
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what is cyclical unemployment ?
demand deficient unemployment - isnt enough D for g&s - firms produce less n downsize - reduces D for labour bc its derived - fire workers - higher unemployment (cyclical)
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what is structural unemployment and when does it occur ?
occurs when the strcuture of the economy changes and jobs shift from one sector to another - there is a mismatch of skills
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two reasons for structural unemployment ?
1. occupational immobility
2. geographical immobility
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how does occupational immobility cause structural unemployment
occupational immbolity means people cant move between different jobs bc they lack the skills needed - structural unemployment
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how can the government help people who are structurally unemployed ?
gov can intervene by increasing
1. education 2. training 3. apprenticeships
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how does geographical immobility lead to structural unemployment ?
if georgpahical immobile - workers cant move locations mayb because of time consuming, expensive, family ties etc therefore they are structurally unemployed
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how can the government help people who are geographical immobile
-intervene by improving transport eg HS2 makes travelling to london cheaper n quicker
-relocating subsidies to help the cost of moving
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what is frictional unemployment ?
when people are temporarily unemployed while searching for a new job - they are in between jobs
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what is seasonal unemployment ?
when workers who are only needed for a high demanded season, once the season is over they are unemployed as not needed anymore
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what is hysteresis ?
when a recession causes long lasting effects which persist after the economy comes out of recession - so the long term effects of a recession on unemployment
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Card 2

Front

what is meant by inactive population

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people of working age who are not able or not actively seeking work they are economically inactive

Card 3

Front

define unemployment

Back

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Card 4

Front

how do you calculate unemployment rate

Back

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Card 5

Front

what is the unemployment level

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