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Chapter 8: Problem 22

What term describes the remaining level of unemployment that occurs even when the economy is healthy?

Short Answer

Expert verified
The term that describes the remaining level of unemployment that occurs even when the economy is healthy is the Natural Rate of Unemployment, which includes frictional and structural unemployment.

Step by step solution

01

1. Identifying the Type of Unemployment in Question

There are different types of unemployment, such as frictional, structural, and cyclical. In the context of this exercise, we need to identify which of these types of unemployment occur even when the economy is healthy.
02

2. Understanding Frictional Unemployment

Frictional unemployment occurs as people move between jobs, industries, or locations. It includes those who are looking for work due to various reasons such as searching for better opportunities, recent graduation, or workforce re-entry. For example, someone might quit their existing job in search of a better opportunity elsewhere, resulting in unemployment during the transition.
03

3. Understanding Structural Unemployment

Structural unemployment results from a mismatch between job seekers' skills and available job requirements. This type of unemployment can occur when industries decline or specific skills become less valuable due to technological advancements or changes in consumer demand. Workers in this category may need retraining or education to find suitable employment.
04

4. Understanding Cyclical Unemployment

Cyclical unemployment occurs due to fluctuations in economic activity, such as a recession or depression. When the economy is healthy, however, the level of cyclical unemployment will be minimal or nonexistent because there is enough demand for products and services to support employment.
05

5. Identifying the Unemployment Term in a Healthy Economy

In a healthy economy, frictional and structural unemployment are more likely to persist, while cyclical unemployment should be reduced to a minimum. The term that accurately describes the remaining level of unemployment in a healthy economy is the Natural Rate of Unemployment. The natural rate of unemployment comprises both frictional and structural unemployment.
06

Conclusion

The term that describes the remaining level of unemployment that occurs even when the economy is healthy is the Natural Rate of Unemployment. This rate of unemployment accounts for frictional and structural unemployment, which are unavoidable due to the nature of the labor market and changes in the economy.

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Most popular questions from this chapter

Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.

What is the difference between being unemployed and being out of the labor force?

What type of unemployment (cyclical, frictional, or structural) applies to each of the following: a. landscapers laid off in response to a drop in new housing construction during a recession. b. coal miners laid off due to EPA regulations that shut down coal fired power c. a financial analyst who quits his/her job in Chicago and is pursing similar work in Arizona d. printers laid off due to drop in demand for printed catalogues and flyers as firms go the internet to promote an advertise their products. e. factory workers in the U.S. laid off as the plants shut down and move to Mexico and Ireland.

A country with a population of eight million adults has five million employed, 500,000 unemployed, and the rest of the adult population is out of the labor force. What's the unemployment rate? What share of population is in the labor force? Sketch a pie chart that divides the adult population into these three groups.

Assess whether the following would be counted as "unemployed" in the Current Employment Statistics survey. a. A husband willingly stays home with children while his wife works. b. A manufacturing worker whose factory just closed down. C. A college student doing an unpaid summer internship. d. A retiree. e. Someone who has been out of work for two years but keeps looking for a job. f. Someone who has been out of work for two months but isn't looking for a job. g. Someone who hates her present job and is actively looking for another one. h. Someone who decides to take a part time job because she could not find a full time position.
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