Question

This set of questions is about unemployment.

a). How high is current unemployment rate? Explain what that number means.

b) What types of unemployment are you likely to encounter in an economy? Give examples.

c). Is it desirable for a government to pursue a goal of zero unemployment? Why or why not?

Answer 1

a)The US unemployment rate fell from 4% in January 2019 to 3.8 %in February 2019.The market expectation was however 3.9% but it fell below that.This number means that unemployed person decreased by 300,000 to 6.2 million.The unemployment rate for adult men,whites ,Hispanics decreased in the month of February. The unemployment rate for adult women ,teenagers ,blacks and Asians showed very little change in February.

b)There are 3 main types of unemployment-Frictional,Cyclical,Structural . Apart from these there are 6 different types. Frictional takes place when workers leave their jobs and try to find new job.As for eg Plant closes down and people start looking for new job.Cyclical unemployment occurs when demand for goods and services fall and the businesses are forced to lay off workers to reduce their cost.Eg -The great depression led to this type of unemployment.Structural unemployment occurs when there is a shift in the economy and the skills that workers have ,do not match with the skills the employers need. Eg industry replaces workers working with machines to robots.Mention may be made of other types like classical, seasonal,voluntary, regional, technological etc.

c) We know that high unemployment is not desirable but zero unemployment which means full employment is not possible and at the same time not desirable too.The Philips curve says why this is not desirable and not practical.There is a relation between inflation and unemployment.Lower rate of unemployment means higher inflation.So zero unemployment or zero inflation is not viable.