4.2.3 Consequences of Unemployment

• What is the primary cause of cyclical unemployment?

  Fluctuations in business cycle
• Match the type of unemployment with its cause:

  Cyclical ↔️ Economic downturns

  Structural ↔️ Skills mismatch

  Frictional ↔️ Job transition

  Seasonal ↔️ Seasonal demand variations
• Seasonal unemployment recurs annually and is predictable.


  True
• During which phase of the business cycle does cyclical unemployment tend to rise?

  Recessions
• What happens to GDP when unemployment increases?

  Decreases
• How does unemployment affect individual living standards?

  Reduces purchasing power
• Unemployment leads to higher government spending on social welfare programs, which can result in higher budget deficits
• Social consequences of unemployment in order of severity

  1️⃣ Mental health issues

  2️⃣ Social isolation

  3️⃣ Crime rates

  4️⃣ Substance abuse

  5️⃣ Family breakdowns
• What type of social issue can prolonged unemployment lead to?

  Social isolation
• Unemployment refers to the condition of individuals within the working age population who are not employed but are actively seeking employment
• Structural unemployment requires retraining or relocation to address the mismatch between jobs and skills.


  True
• What is a characteristic feature of seasonal unemployment?

  Recurs annually
• What is one of the mental health issues associated with prolonged unemployment?

  Depression
• Unemployment exacerbates social inequalities
• Unemployment often leads to mental health issues such as increased depression, anxiety, and low self-esteem
• Unemployment refers to the condition of individuals within the working age population who are not employed but are actively seeking employment. These individuals must be willing and available to work but have not been able to find a job despite their efforts
• Structural unemployment is typically short-term and easily resolved.

  False
• What is the main cause of frictional unemployment?

  Temporary joblessness
• Structural unemployment is often caused by a mismatch between available jobs and the skills of the workforce.
• Increased unemployment reduces government tax revenues and increases social welfare spending.


  True
• What is the impact of unemployment on Gross Domestic Product (GDP)?

  Decrease in GDP
• How does unemployment affect the purchasing power of individuals?

  Reduces purchasing power
• Unemployment disproportionately affects certain demographics such as youth and minorities.


  True
• What is the primary cause of cyclical unemployment?

  Business cycle fluctuations
• Match the type of unemployment with its cause:

  Cyclical Unemployment ↔️ Business cycle fluctuations

  Structural Unemployment ↔️ Mismatch between jobs and skills

  Frictional Unemployment ↔️ Transition between jobs

  Seasonal Unemployment ↔️ Time of year variations
• Unemployment reduces economic output, leading to a decrease in GDP
• Unemployment can lead to substance abuse due to financial and emotional stress.


  True
• What social inequalities does unemployment exacerbate?

  Youth and minorities
• Unemployment is linked to higher crime rates.

  True
• Match the social consequence of unemployment with its impact:

  Mental health issues ↔️ Increased depression, anxiety, low self-esteem

  Social isolation ↔️ Loss of social connections, strained relationships

  Crime rates ↔️ Higher incidence of criminal activity

  Substance abuse ↔️ Increased use of drugs and alcohol
• Prolonged joblessness can result in a loss of skills and reduced employability
• Order the relationship between employment level and government tax revenue:

  1️⃣ Low unemployment

  2️⃣ High employment

  3️⃣ High government tax revenue
• During an economic recession with high unemployment, the government collects less income tax
• Lowering interest rates is a monetary policy strategy to encourage borrowing and investment.


  True
• Labor market policies include job training and employment services
• What is a financial strain caused by unemployment?

  Difficulty meeting basic needs
• Mental health issues are common among the unemployed due to financial stress.


  True
• What happens to government tax revenue during high unemployment?

  It decreases
• Match the unemployment mitigation strategy with its description:

  Fiscal Policy ↔️ Increased government spending, lower taxes

  Monetary Policy ↔️ Lower interest rates, increase money supply

  Labor Market Policies ↔️ Job training, employment services
• What is the purpose of investing in job training and retraining programs?

  Develop necessary skills