Cambridge International as and a level Economics Ebook

Table 9.8 
Population and labour market data for ten economies
240
Cambridge International A Level Economics

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Unemployment
Definition
People are unemployed when they are able and willing 
to work but cannot fi nd a job. Th
e 
level
of 
unemployment
should be distinguished from the 
rate
of unemployment. 
Th
e level of unemployment refers to the total number 
of people who are unemployed whereas the rate of 
unemployment is the number of unemployed people as a 
percentage of the labour force. So in an economy with a 
labour force of 50 million people, 4.3 million of whom are 
unemployed, the rate of unemployment is 8.6%.
Unemployment: 
the state of being willing and able to work 
but without a job.
KEY TERM
Equilibrium and eff iciency: 
Unemployment is a clear 
example of ineff iciency. An economy is not achieving 
productive eff iciency as it is not making full use of its 
resources and not producing as much as possible.
KEY CONCEPT LINK
Full employment and the natural rate of 
unemployment
Full employment
is considered to be the highest level 
of employment possible. It is oft en considered to be 
achieved when the unemployment rate falls to 3%, 
although the rate may vary between countries. Th
is 
may appear to be somewhat surprising as it might be 
expected that it would be 0% unemployed. However, 
in practice, at any particular time some people may be 
experiencing a period of unemployment as they move 
from one job to another job.
Th
e
 natural rate of unemployment
can also be 
referred to as the non-accelerating infl ation rate of 
unemployment (Nairu). Th
is is largely a monetarist 
concept. Th
e natural rate of unemployment is the 
unemployment that exists when the aggregate demand 
for labour equals the aggregate supply of labour at the 
current wage rate and price level. Th
e infl ation rate is 
constant, with the actual infl ation rate equalling the 
expected one at this rate of unemployment.