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Key Economic Indicator: Unemployment (Types (Frictional UnN (inevitable…
Key Economic Indicator: Unemployment
Unemployment Rate
No. of Unemployed/Labour Force x 100%
Labour force
Min Working Age
Able to Work
Willing and actively looking for a job at current wage rate
Economic Performance
USES
High Unemployment associated with
low consumption
and
investment spending
. Tends to
increase gov. expenditure
on increasing welfare while reducing gv. revenue as incomes are lower
Indicates spare capacity of economy
Limitations
:red_flag:
Measuring
: Lag indicator
:red_flag:
Measuring
:Unreported, under reported and illegal unemployment
:red_flag:Dynamic Pool of Participants
:red_flag: Discouraged Workers
:red_flag:Under Employment
SOL
USES
high UnN--> Reduced Income--> Reduction in quantity and quality of goods and services that can be bought due to decrease in purchasing power--> lower mat SOL
High UnN--> Lower investments in training by workers--> lower productivity--> lower future SOL
Structural UnN: By Government: to devise appropriate policies to reduce skills mismatch and problems of inequity
Labour Participation rate
Labour Force/Population x 100
dependency ratio and productive capacity of the economy
Types
DD deficient UnN
Lower aggregate demand
Structural UnN
mismatch of skills
More serious problem in the recent climate of a more globalised environment and technological advancement
Frictional UnN
inevitable and short term
result of market imperfections
Situation where people are unable to find unemployment even though they are of legal working age and are both capable and willing to work at current wage rates.
Natural Rate of Unemployment
refers to the rate of unemployment when the labour market is at equilibrium.
comprises of both structural and frictional UnN