What Causes Changes in Unemployment over the Long Run

Review Questions

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

What forces create the natural rate of unemployment for an economy?

Would you expect the natural rate of unemployment to be roughly the same in different countries?

Would you expect the natural rate of unemployment to remain the same within one country over the long run of several decades?

What is frictional unemployment? Give examples of frictional unemployment.

What is structural unemployment? Give examples of structural unemployment.

After several years of economic growth, would you expect the unemployment in an economy to be mainly cyclical or mainly due to the natural rate of unemployment? Why?

What type of unemployment (cyclical, frictional, or structural) applies to each of the following:

  1. landscapers laid off in response to a drop in new housing construction during a recession.
  2. coal miners laid off due to EPA regulations that shut down coal fired power
  3. a financial analyst who quits his/her job in Chicago and is pursing similar work in Arizona
  4. printers laid off due to drop in demand for printed catalogues and flyers as firms go the internet to promote an advertise their products.
  5. factory workers in the U.S. laid off as the plants shut down and move to Mexico and Ireland.