Unemployment

• What is unemployment?

  When someone is willing and able to supply themselves for work, but cannot.
• What are the four main types of unemployment?

  • Structural
  • Cyclical
  • Seasonal
  • Frictional
• Explain structural unemployment:

  When an industry declines, the demand for labour in that industry reduces aswell.
• Explain cyclical unemployment:

  If there is a fall in Aggregate Demand in the economy, the demand for labour reduces.
• Explain seasonal unemployment:

  Workers are left without employment as a result of a decreased demand at different times of the year.
• Explain frictional unemployment:

  Workers are not employed when they are moving between jobs.
• What are the two (main) reasons for a worker being unable to supply their labour?

  • Geographical immobility
  • Occupational immobility
• Explain geographical immobility:

  A worker is unable to supply their labour to a firm as a result of barriers preventing the worker from moving to another area.
• Explain occupational immobility:

  Due to insufficient skills, a worker cannot supply their labour to firms.
• Why is full employment unattainable?

  Frictional Unemployment
• How might (full) employment affect economic growth?

  More products can be produced with higher employment, so the GDP increases, benefitting economic growth.
• How might (full) employment affect controlled inflation?

  Employment allows for people to have a higher (average) wage, so AD shifts to the right. This may cause Demand-Pull inflation.
• How might (full) employment help the Balance of Payments?

  As firms have higher productive capacity, they have the ability to sell their products abroad. Because of this, export revenue increases, so employment helps the BOP.
• How might (full) employment harm the Balance of Payments?


  Employment allows for consumers to have a higher (average) wage. With this, the demand for imported goods increases. Because import expenditure increases, employment harms the BOP.