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NSWEconomicsQuick questions
Topic 3: Economic Issues
Quick questions on Unemployment in Australia: measurement, types and causes (HSC Economics Topic 3)
8short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is measurement of unemployment?Show answer
The unemployment rate is the number of unemployed people as a percentage of the labour force:
What is types of unemployment?Show answer
1. Cyclical (demand-deficient): caused by a fall in aggregate demand. Most relevant during recessions. Rose to around 7 percent during the 2009 GFC and the 2020 COVID-19 recession.
What is the NAIRU?Show answer
The non-accelerating inflation rate of unemployment (NAIRU) is the lowest unemployment rate at which inflation is stable. Below the NAIRU, wage and price pressures build; above the NAIRU, inflation eases.
What is recent unemployment trends in Australia?Show answer
Unemployment fell to a 50-year low of 3.5 percent in 2022 as the post-COVID recovery and migration restrictions tightened the labour market. It has drifted up since 2023 as RBA rate rises slowed AD growth.
What is consequences of unemployment?Show answer
1. Lost output (Okun's Gap). The real GDP forgone when unemployment exceeds the NAIRU. Treasury estimates each 1 pp of cyclical unemployment costs around 2 percent of GDP per year.
What is confusing the unemployment rate with the participation rate?Show answer
They measure different things.
What is treating all unemployment as cyclical?Show answer
Markers want clear distinctions between cyclical, structural and frictional, with examples.
What is saying unemployment is purely an AD problem?Show answer
Long-run unemployment depends on AS-side factors (NAIRU, skills, minimum wages). Macro policy must use AS-side tools too.