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Key Labor Market Indicators

  • Rate of unemployment: No. of unemployed / no. of people in labor force.
  • Labor-force participation rate: Civilian labor force / civilian population age 16 or older.
  • Employment-to-population ratio: %age of working-age population who are employed.
  • Aggregate hours: Total hours worked in a year by all employed people.
  • Real wage rate: Money wages adjusted for changes in the price level

Types of Unemployment

  • Frictional unemployment arises from constant changes in the economy that prevent qualified workers from being matched with existing job openings in a timely manner.
  • Structural unemployment is caused by structural changes in the economy that eliminate some jobs while generating job openings for which unemployed workers are not qualified.
  • Cyclical unemployment is caused by a change in the general level of economic productivity. When the economy is operating at less than full capacity, positive levels of cyclical unemployment will be present.

Sample Question:


Which of the following is most likely to be an example of structural unemployment?

  1. Jack was unable to find new job with a lucrative salary, though he was offered a salary hike of 15% by another employer.
  2. Demand for the actuarial candidates are quite high compared to insurance agent. 
  3. John is searching for a new job as he don’t have expertise in handling new high rise crane, which his employer has installed recently.

Ans: C


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