Why is there unemployment even when the economy is at "full employment"?
What will be an ideal response?
There is unemployment even at "full employment" because there always will be unemployment. Unemployment is a natural occurrence in any economy with changes, such as high school or college graduates entering the labor force, or technological advances in one sector, or consumer preferences changing to favor one product over another. Frictional and structural unemployment will always exist. Cyclical unemployment, however, is a different matter. Cyclical unemployment does not seem to have the same degree of inevitability and hence full employment is defined as occurring when cyclical unemployment equals zero.
You might also like to view...
China's prosperity brings income gap The Asian Development Bank [ADB] reports that China has the largest gap between the rich and the poor in Asia
Ifzal Ali, the ADB's chief economist, claims it is not that the rich are getting richer and the poor are getting poorer, but that the rich are getting richer faster than the poor. Source: Financial Times, August 9, 2007 Explain how the distribution of personal income in China can be getting more unequal even though the poorest 20 percent are getting richer.
The compensated demand curve holds the consumer's utility fixed as the price changes
Indicate whether the statement is true or false
If a straight line crosses the Y-axis at 5 and crosses the X-axis at 10, we can conclude that the slope of the line is
A) positive. B) negative. C) zero. D) infinity.
In the market for yen, a decrease in U.S. real interest rates tends to
A. increase excess supply. B. cause no change in equilibrium price. C. decrease equilibrium price. D. increase demand.