AP Macroeconomics AMSCO Guided Notes
2.3: Unemployment
AP Macroeconomics Guided Notes
AMSCO 2.3 - Unemployment
Essential Questions
- What are the different types of unemployment, and why is the rate of unemployment difficult to assess?
I. Types of Unemployment
1. What is the unemployment rate and what formula is used to calculate it?
2. Why do economists distinguish between different types of unemployment?
A. Frictional Unemployment
1. What is frictional unemployment and what causes it?
2. Why is frictional unemployment not a major focus of policy concerns?
B. Structural Unemployment
1. What is structural unemployment and what are examples of its causes?
2. How does structural unemployment differ from frictional unemployment in terms of difficulty to address?
C. Cyclical Unemployment
1. What is cyclical unemployment and what economic conditions cause it?
2. How did cyclical unemployment during the Great Depression and Great Recession differ in severity?
D. Seasonal Unemployment
1. What is seasonal unemployment and what are examples of industries affected by it?
II. Labor Force
1. What groups of people are included in the labor force and what groups are excluded?
A. Labor Force Participation Rate
1. What is the labor force participation rate and what formula is used to calculate it?
2. How did the U.S. labor force participation rate change between 1967 and 1987, and what was the primary cause?
III. Full Employment
1. What is full employment and why is it not equivalent to zero unemployment?
2. What unemployment rate range do many economists consider to represent full employment?
A. Natural Rate of Unemployment
1. What is the natural rate of unemployment and what formula is used to calculate it?
2. How is the cyclical unemployment rate determined using the natural rate of unemployment?
3. Why does the natural rate of unemployment account for workers being unemployed even when the economy is growing?
IV. Limitations of the Unemployment Rate
1. What are discouraged workers and how do they affect unemployment statistics?
2. What is underemployment and how does it differ from unemployment?
3. How do part-time workers and chronically unemployed workers affect the accuracy of unemployment rate measurements?
4. Why does the standard unemployment rate underreport the actual number of people without adequate work?
Key Terms
unemployment rate
labor force
frictional unemployment
structural unemployment
cyclical unemployment
seasonal unemployment
labor force participation rate
full employment rate
natural rate of unemployment