Economics 101 Practice Test: Unemployment — Flashcards

Unemployment is when someone is actively looking for a job but can't find one. The unemployment rate is the most common way to measure unemployment. It's calculated by dividing the number of unemployed people by the working population. 

Here are some types of unemployment:

Structural unemployment: When a worker's skills don't match the skills needed for available jobs. This can also happen when workers are available but can't get to the jobs' locations.
Frictional unemployment: When people are unemployed while looking for a new job or taking a break from work. This type of unemployment is usually short-term and is considered a healthy part of a dynamic economy.
Cyclical unemployment: When unemployment is caused by the current state of the economy. For example, if the economy is doing well, cyclical unemployment will be low.
Seasonal unemployment: When people working in seasonal jobs are laid off when the season ends.
Voluntary unemployment: When the wage doesn't provide enough incentive for the unemployed to work, so they choose to claim unemployment benefits. 

Some other causes of unemployment include:
The caste system (India)
Inadequate economic growth
Population increase
Agriculture
Loss of small-scale/cottage industries
Low rates of saving and investment
Ineffective economic planning
Labor immobility 

The unemployment rate is the percentage of people in the labor force that are unemployed at any given time. It's calculated by dividing the number of unemployed people by the total labor force, which includes people who are 16 years and older and are employed or able to work and actively seeking employment. There is no solid guideline for what a high or low unemployment rate is, but a degree of unemployment is normal for an economy. The unemployment rate is one of the primary economic indicators used to measure the health of an economy, and it tends to fluctuate with the business cycle.