4.7

Employment and unemployment

Cambridge IGCSE Economics (0455)  · Unit 4: Government and the macroeconomy  · 10 flashcards

Employment and unemployment is topic 4.7 in the Cambridge IGCSE Economics (0455) syllabus , positioned in Unit 4 — Government and the macroeconomy , alongside Government role in economy, Macroeconomic aims and Fiscal policy.  In one line: Employment refers to a situation where individuals are actively engaged in productive activities for which they receive payment, contributing to the overall output of goods and services in an economy.

This topic is examined in Paper 1 (multiple-choice) and Paper 2 (structured questions, including data-response items).

The deck below contains 10 flashcards — 2 definitions, 6 key concepts and 1 application card — covering the precise wording mark schemes reward.  Use the 2 definition cards to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.

Key definition

'employment' in economics

Employment refers to a situation where individuals are actively engaged in productive activities for which they receive payment, contributing to the overall output of goods and services in an economy.

Example: a teacher working at a school is employed.

Questions this Employment and unemployment deck will help you answer

Definition Flip

Define 'employment' in economics.

Answer Flip

Employment refers to a situation where individuals are actively engaged in productive activities for which they receive payment, contributing to the overall output of goods and services in an economy.

Example: a teacher working at a school is employed.
Definition Flip

What is 'unemployment' and how is it different from 'not in the labor force'?

Answer Flip

Unemployment occurs when people are actively seeking work but unable to find a job despite being willing and able to work at the current wage rate. 'Not in the labor force' includes those who are not actively seeking work, such as retirees or full-time students.

Key Concept Flip

Explain how to calculate the 'unemployment rate'.

Answer Flip

The unemployment rate is calculated as (Number of Unemployed / Total Labor Force) x 100. The labor force includes all those who are employed or unemployed but actively seeking work.

Example: if 5 million people are unemployed and the labor force is 50 million, the unemployment rate is 10%.
Key Concept Flip

Describe 'cyclical unemployment' and its primary cause.

Answer Flip

Cyclical unemployment is unemployment caused by a downturn in the business cycle or a recession. As demand for goods and services falls, firms reduce production and lay off workers.

Example: during the 2008 financial crisis, many construction workers experienced cyclical unemployment.
Key Concept Flip

Explain 'structural unemployment' and give an example.

Answer Flip

Structural unemployment arises from a mismatch between the skills workers possess and the skills demanded by employers. This can be due to technological changes or shifts in industry.

Example: a coal miner losing their job due to the decline of the coal industry and lacking skills for other sectors.
Key Concept Flip

What is 'frictional unemployment' and why is it considered a natural part of a healthy economy?

Answer Flip

Frictional unemployment is temporary unemployment arising from workers searching for better jobs or transitioning between jobs. It's natural as people seek opportunities that better match their skills and preferences, thus contributing to a more efficient allocation of labor resources.

Key Concept Flip

Describe 'seasonal unemployment' and provide a relevant example.

Answer Flip

Seasonal unemployment occurs when people are out of work because their jobs are only available during certain times of the year.

Example: a lifeguard who is only employed during the summer months or a ski instructor during the winter.
Key Concept Flip

Outline two economic consequences of high unemployment rates.

Answer Flip

High unemployment leads to lower aggregate demand due to reduced consumer spending and increased government spending on unemployment benefits. It can also lead to decreased tax revenue for the government and increased social problems, such as poverty and crime.

Key Concept Flip

Explain two social consequences of unemployment.

Answer Flip

Unemployment can lead to increased stress, anxiety, and mental health problems for individuals and families. It can also result in increased crime rates and social unrest as people struggle to meet their basic needs.

Key Concept Flip

Describe one policy a government could use to reduce structural unemployment.

Answer Flip

Governments can implement retraining programs to equip unemployed workers with new skills that are in demand in the labor market. This helps bridge the skills gap and facilitates the transition to new industries.

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4.6 Economic growth 4.8 Inflation and deflation

Key Questions: Employment and unemployment

Define 'employment' in economics.

Employment refers to a situation where individuals are actively engaged in productive activities for which they receive payment, contributing to the overall output of goods and services in an economy.

Example: a teacher working at a school is employed.
What is 'unemployment' and how is it different from 'not in the labor force'?

Unemployment occurs when people are actively seeking work but unable to find a job despite being willing and able to work at the current wage rate. 'Not in the labor force' includes those who are not actively seeking work, such as retirees or full-time students.

More topics in Unit 4 — Government and the macroeconomy

Employment and unemployment sits alongside these Economics decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.

4.1 Government role in economy

9 flashcards
4.2 Macroeconomic aims

10 flashcards
4.3 Fiscal policy

10 flashcards
4.4 Monetary policy

9 flashcards
4.5 Supply-side policy

8 flashcards
4.6 Economic growth

9 flashcards
4.8 Inflation and deflation

10 flashcards

Cambridge syllabus keywords to use in your answers

These are the official Cambridge 0455 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.

employment unemployment unemployment rate cyclical unemployment structural unemployment frictional unemployment seasonal unemployment consequences of unemployment

Key terms covered in this Employment and unemployment deck

Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.

'employment' in economics
'unemployment' and how is it different from 'not in the labor force'

How to study this Employment and unemployment deck

Start in Study Mode, attempt each card before flipping, then rate Hard, Okay or Easy. Cards you rate Hard come back within a day; cards you rate Easy push out to weeks. Your progress is saved in your browser, so come back daily for 5–10 minute reviews until every card reads Mastered.