L12_-Unemployment_Causes_Consequences_and_Cures

What are the two main measures of unemployment?

The claimant count - the number of people receiving unemployment benefits

ILO unemployment - International Labour Organization (ILO) measure, which includes those actively seeking work

What causes fluctuations in GDP according to the lecture?

Fluctuations in aggregate demand, primarily due to changes in private investment.

What is the accelerator model?

It links investment to changes in GDP, stating that as GDP rises, investment also increases. This model suggests that an increase in output leads to higher demand for capital and, consequently, more investment in the economy.

What is a significant consequence of rising capacity constraints during economic expansion?

It can lead to an increase in prices of labor, capital, and other inputs, slowing economic growth.

What type of unemployment is characterized by a mismatch of skills and vacancies?

Structural unemployment.

What do built-in stabilizers refer to in the context of GDP fluctuations?

Unemployment benefits and welfare payments that limit the fall in GDP during downturns.

What is cyclical unemployment caused by?

A negative output gap and sticky wages in the labor market. It occurs when the economy is in recession, leading to reduced demand for goods and services, resulting in layoffs and higher unemployment rates.

Define frictional unemployment.

Short term unemployment associated with the process of matching workers with jobs.

What is the participation rate in the labor force?

The percentage of the working-age population that is active in the labor force.

What can be a cause of voluntary unemployment?

Workers choosing not to work or to leave a job.

According to the NBER, how many business cycles were there between 1945 and 2009?

11

What is the marginal propensity to withdraw?

The proportion of additional income that households and businesses choose to withdraw from the economy, either by saving or spending outside the local economy (e.g., imports)

What is the significance of business expectations in the context of economic cycles?

They influence current production plans, which can be volatile and self-fulfilling.

What is ‘involuntary unemployment’?

Unemployment where individuals do not choose to be out of work, typically due to redundancy.

How do changes in private investment affect economic cycles?

Changes in private investment can lead to fluctuations in economic cycles by influencing overall demand for goods and services. When investment increases, it can spur economic growth and job creation, while decreases can lead to downturns and rising unemployment.

What is a turning point in the context of business cycles?

Where the direction of the cycle changes, which can be sudden or gradual.

Identify one challenge of measuring unemployment in macroeconomics.

The claimant count can be inaccurate as it does not include those not claiming benefits.

What is economic inactivity, according to the ILO classification of employment?

Individuals who are not in the labor force, meaning they are neither employed nor unemployed.