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Chapter 21: Q 22. (page 524)

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

Short Answer

Expert verified

The natural level of unemployment describes this situation.

Step by step solution

01

Step 1. Definition

Frictional unemployment is the period when a worker is chosen to leave their job in search of the new one and the workers join the workforce for the first time.

Structural unemployment is a type of involuntary unemployment which is caused due to the mismatch between the workers and skills required and this is also called the skill gap.

02

Step 2. Explanation

When the economy is healthy and doing well the remaining level of unemployment is described by the natural level of unemployment.

03

Step 3. Natural rate of employment

The labor market is incomplete equilibrium when there is a natural level of unemployment and this occurs because of frictional and structural unemployment.

Even the fully developed economies also have a natural rate of unemployment because in an economy the workers may come and go and always look for a better job, the period in which the workers are looking for a job is called the natural level of unemployment.

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Most popular questions from this chapter

Why do you think that unemployment rates are lower for individuals with more education?

Beginning in the 1970s and continuing for three decades, women entered the U.S. labor force in a big way. If we assume that wages are sticky in a downward direction, but that around 1970 the demand for labor equaled the supply of labor at the current wage rate, what do you imagine happened to the wage rate, employment, and unemployment as a result of increased labor force participation?

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.

Suppose the adult population over the age of 16 is 237.8 million and the labor force is 153.9 million (of whom 139.1 million are employed). How many people are “not in the labor force?” What are the proportions of employed, unemployed and not in the labor force in the population? Hint: Proportions are percentages.

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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