Unemployment and Immigration

• What is required for an economy to operate on the PPF?

  Factors of production need to be fully employed
• What does unemployment focus on in macroeconomic terms?

  It focuses specifically on the factor of production of labour
• What happens when macroeconomic equilibrium output is below potential full employment level?

  It results in unnecessary waste of potential output
• What is a cost suffered by unemployed individuals?

  They could have been productively employed
• What are the types of unemployment that can exist simultaneously?

  • Frictional unemployment
  • Structural unemployment
  • Seasonal unemployment
  • Voluntary unemployment
  • Demand-deficient unemployment
  • Cyclical unemployment
• What is frictional unemployment?

  Unemployment during job transitions in an economy
• Why is frictional unemployment necessary?

  It allows adaptation to changing consumer demand
• What is structural unemployment?

  Unemployment due to a mismatch of skills and jobs
• Why might a coal miner struggle to become a banker?

  Due to the need for retraining and skill mismatch
• What is seasonal unemployment?

  Unemployment due to fluctuations in certain industries
• What can lead to voluntary unemployment?

  High unemployment benefits compared to low wages
• What is demand-deficient unemployment?

  Unemployment when total demand is insufficient
• How does cyclical unemployment relate to the business cycle?

  It rises during economic downturns and falls during peaks
• What causes cyclical unemployment?

  Lack of demand for labor during economic downturns
• What is real wage inflexibility?

  Wages set above equilibrium causing unemployment
• How does unemployment affect government tax revenue?

  Unemployed workers do not pay taxes and receive benefits
• What does unemployment imply about productive capacity?

  Not all resources are fully utilized in the economy
• What happens to LRAS/SRAS when unemployed workers find jobs?

  It does not shift as quantity of labor remains the same
• How does increased employment affect aggregate demand?

  It increases consumption and leads to economic growth
• What social issues can arise from unemployment?

  Increased levels of crime and reduced well-being
• What is underemployment?

  Workers in low-paying jobs despite high skills
• How can underemployment affect unemployment figures?

  It can make unemployment appear lower than it is
• What challenges do highly trained immigrants face in the job market?

  Recognition of foreign credentials and discrimination
• What is the relationship between immigration and unemployment?

  No clear link; depends on economic conditions
• How can net migration affect the labor market?

  It increases labor supply and demand through consumption
• What can happen to migrants during high unemployment periods?

  They may struggle to find work due to competition
• How can low-skilled migrants experience structural unemployment?

  They may lack skills needed for available jobs
• How does an increase in labor supply affect wages?

  It may push down wages if demand doesn't increase
• What factors determine the impact of net immigration on unemployment?

  Skills, integration ease, age profile, economic climate
• How can migrants contribute to the economy?

  By paying taxes and filling labor shortages
• What is the dependency ratio?

  The ratio of non-working population to working population
• What is a potential issue with increased migration on public services?

  Increased demand for services like schools and housing