2.1.3 Employment and unemployment Quiz: Pearson Edexcel Economics A, Unit 2

The 20 questions

1. The claimant count measures unemployment by counting:

   • all people who are not in education, employment or training
   • everyone aged 16 and over who has not worked in the last four weeks
   • people claiming unemployment-related benefits who are out of work and seeking work
   • people who have a job but are working fewer hours than they would like

2. The ILO unemployment measure used in the UK Labour Force Survey counts a person as unemployed if they:

   • are without work, available to start work within two weeks, and have actively sought work in the last four weeks
   • are working part time but would like to work more hours, and are available to start additional work in the same week as the survey
   • are claiming benefits, are over the age of 25 and have registered at a jobcentre, whether or not they are seeking any work
   • have not worked at all in the last twelve months, regardless of whether they are available to start work or have looked for a job

3. Under-employment refers to people who:

   • are in work but want more hours or are working below their skill level
   • are in full-time education and not seeking a job
   • are unemployed and have stopped looking for work altogether
   • have retired early and are receiving a private pension

4. A rise in the economic inactivity rate, with the employment rate unchanged, means that:

   • unemployment has fallen because more people have found jobs
   • the number of people in full-time employment has fallen by an equal amount
   • the share of working-age people neither working nor seeking work has increased
   • the number of people claiming the Jobseeker's Allowance has risen sharply

5. Structural unemployment is best described as:

   • unemployment caused by a fall in aggregate demand during a recession, so firms reduce output and lay off workers across sectors
   • unemployment that occurs temporarily while workers search for new jobs, usually because they have just left a job
   • unemployment that arises when the skills of workers do not match the jobs available, often because industries decline
   • unemployment from seasonal changes in demand for labour, such as in tourism or farming, which disappears when the season returns

6. Frictional unemployment occurs because:

   • the economy operates at full employment with no movement of workers
   • aggregate demand falls and firms reduce their labour demand
   • wages are set above the market-clearing level by trade unions
   • workers take time to search for suitable jobs and move between jobs

7. Seasonal unemployment is most common in which sector?

   • manufacturing of computer chips, where output is constant in every month
   • tourism and agriculture, where labour demand varies strongly across the year
   • the public sector, where pay is set in national negotiations each year
   • financial services, where contracts are normally signed for ten years

8. Demand-deficient (cyclical) unemployment is caused by:

   • a fall in aggregate demand leading to lower output and fewer jobs in the economy
   • a shortage of skills among workers entering the labour market for the first time
   • workers moving home to take up better-paid jobs in other regions
   • an increase in the level of frictional job search across the economy

9. Real wage inflexibility as a cause of unemployment means that:

   • real wages fail to fall to clear the labour market, so labour supply exceeds labour demand
   • workers cannot change jobs because of a lack of transport links, so the local labour market cannot match vacancies with job seekers
   • real wages rise every year in line with productivity, which always removes unemployment because firms can hire every worker
   • nominal wages are fixed by the central bank at a constant level, so employers cannot change pay as demand for labour changes

10. Which statement best explains the effect of migration on employment?

    • Migration always reduces employment because migrants are paid less, so firms replace domestic staff with cheaper migrant labour
    • Migration can increase labour supply, filling skills gaps and possibly raising output, though effects depend on the skills of migrants
    • Migration has no effect on employment, since the number of available jobs is fixed by the size of the economy
    • Migration affects only inflation through higher consumer demand, because all workers are paid the same market rate

11. Which effect of unemployment on the government is most likely?

    • a fall in spending on benefits as more people leave the labour force, which reduces the cost of welfare
    • a rise in tax revenue from unemployed workers, who pay income tax on their benefits and so add to public receipts
    • an improvement in the budget balance as income tax receipts rise, since people in work pay more tax during the recession
    • higher spending on benefits and lower tax revenue from income tax and National Insurance

12. A rise in the unemployment rate from 4% to 5% of a labour force of 30 million means the number of unemployed people has risen by:

    • 300,000
    • 1,500,000
    • 30,000
    • 3,000,000

13. The employment rate is 75% for a working-age population of 40 million. How many people are in employment?

    • 30 million
    • 53 million
    • 10 million
    • 3 million

14. A labour force of 32 million has 1.6 million unemployed people. What is the unemployment rate?

    • 20%
    • 5%
    • 0.5%
    • 1.6%

15. An economy's working-age population is 50 million, the labour force is 35 million and employment is 33 million. What is the economic activity rate?

    • 70%
    • 94%
    • 30%
    • 66%

16. Why might a fall in the unemployment rate be accompanied by a rise in the economic inactivity rate?

    • Inactivity falls whenever unemployment falls, so the two measures always move together in every region of the country
    • Inactive people are counted as employed by the Labour Force Survey, so a fall in unemployment always reflects more people with jobs
    • People may stop looking for work, so they leave the unemployed count while still not being in employment
    • Inactivity counts only people working part time, so a rise in inactivity always means more people in part-time work each year

17. The effects of long-term unemployment on workers include:

    • a permanent rise in their real wages once they find new work
    • higher skills from extended periods of job searching
    • loss of skills, lower confidence and reduced future earning potential
    • an increase in their pension entitlement and savings

18. Which combination of unemployment types is most relevant for a sudden fall in car manufacturing demand and jobs in a region?

    • cyclical unemployment in the short run, and structural unemployment if the skills are not transferable
    • frictional unemployment only, since workers who lose car jobs move between jobs quickly and no lasting loss occurs
    • under-employment only, since all car workers still have some work, even if they would like to work more hours
    • seasonal unemployment only, since car production changes each season and workers are laid off in the same way each year

19. A government reduces unemployment benefit in order to increase the incentive to work. Which unemployment type is this policy most directly aimed at?

    • seasonal unemployment, by changing the timing of production
    • demand-deficient unemployment, by lowering the interest rate
    • cyclical unemployment, by increasing aggregate demand in the economy
    • frictional unemployment, by shortening the time workers spend searching for jobs

20. Which statement best evaluates the claimant count as a measure of unemployment?

    • It counts only those in full-time work, so it misses part-time workers who want more hours and are unemployed in practice
    • It always overstates unemployment because it includes students and retirees who are not looking for work, so it counts too many
    • It is the most accurate measure because it counts everybody without a job, including students, carers and retired people seeking work
    • It is easy to measure and timely, but it can understate unemployment because not all jobless people claim benefits

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