aExplain how unemployment is calculated and describe differe

(a)Explain how unemployment is calculated and describe different types of unemployment.

(b) Why is there always going to be some amount of unemployment in the economy?

(c) What problems arise in interpreting the unemployment data?

Solution

a)

Structural Unemployment - Demand increases for some jobs skills while other job skills become outmoded due to changes in market economies and are no longer in demand or we can say it typically occurs due to technological change, rather than fluctuations in supply or demand

Frictional Unemployment - Workers who are voluntarily between jobs, while some are looking for better jobs and it takes times to search for the better job due to a lack of perfect information. It may also happen due to moving workers to different geographical location for personal reasons. In other words, it occurs due to the process of moving from one job to another.

Cyclical Unemployment - This occurs due to downturns in overall business activity. In other words, workers lose their jobs as of downturns in the business cycle.

The unemployment rate is the percentage of unemployed in the labor force. (unemployed people/labor force)*100 = unemployment rate or it can be calculated as the number of unemployed divided by the number of persons in the labor force.