Chapter 8 Economics Workbook Questions
Chapter 8 Economics Workbook Questions
Chapter 8 Economics Workbook Questions
QUESTIONS
1.
a. Outline ONE economic cost and ONE social cost of unemployment. (2 marks)
An economic cost of unemployment is lower living standards, and a social cost of
unemployment is income inequality. Unemployment results in lower disposable incomes for
unemployed workers as they are reliant on social welfare payments for income. Thus, they
experience lower material living standards. Further, unemployment is more frequent in low-
income earners (e.g., young & unskilled individuals) compared to high-income earners. As
unemployment reduces the income of low-income earners further, income inequality within
the economy rises along with poverty.
2.
a. 85.3%
b. 10.3%
c. Hidden unemployment
d. -5.2%
e. Briefly explain how changes in the level of underemployment might not affect the
unemployment rate. (2 marks)
Changes in underemployment might not affect the unemployment rate because
underemployed individuals are still considered ‘employed’ by official statistics. If
underemployment falls, individuals are working more hours, however, they were considered
employed prior to this as well. If underemployment rises, more individuals are working less
hours than they desire, however, they are still considered ‘employed’. Thus, unemployment
might not be affected by changes in the level of underemployment.
f. Discuss what measures the government might take to increase the labour force
participation rate. (4 marks) TBH I HAVE NO CLUE
The government may utilise expansionary fiscal policy through increased government
expenditure or may make changes to the federal minimum wage rate to increase the labour
force participation rate. Through increased government expenditure on social welfare, skills
training and Jobseeker payments, individuals are encouraged to join the labour force and
search for work, thereby increasing the labour force participation rate. However, this will be
seen as a short-term increase in the unemployment rate. Then, by increasing the minimum
wage rate, individuals will be encouraged to work due to the higher possibilities of earning,
thereby increasing the labour force participation rate again. However, firms will search for
more skilled labour due to the higher production costs that the minimum wage will entail.
3.
a. Outline the relationship between economic growth and unemployment. (3 marks)
There is a high correlation between economic growth and the unemployment. As economic
growth increases, the level of demand for goods and services in an economy increases, also
known as growth in aggregate demand. Since the demand for labour is a demand derived
from the demand for goods and services within an economy, firms employ more labour to
satisfy this increase in demand, thereby reducing unemployment. Conversely, if economic
growth decreases, the level of demand for goods and services in an economy also decreases,
also known as a fall in aggregate demand. This means that firms are selling less products and
so they lay off workers to maintain profits, thus unemployment increases.
c. SKIPPING.