Why does the term full employment imply an unemployment rate ...

[nelaaney]

Why does the term full employment imply an unemployment rate greater than zero? Discuss your answer in terms of the types of unemployment.

Question 2

Suppose you live in a community of 100 people where everyone who is able to do so seeks work. If 80 people are over 16 years old and 72 of them are employed, what is the unemployment rate in this community?

[Ahnyah]

Answer to Question 1

Full employment implies an unemployment rate greater than zero because some types of unemployment are unavoidable. Frictional unemployment always tends to exist as individuals move to different jobs and move to different locations. Structural unemployment is also quite common as advances in technology and changes in the types of goods produced reduce the need for workers in specific industries or specific positions.

Answer to Question 2

In this community, only 80 people qualify as part of the labor force. Since 72 of them are working, 8 must be currently unemployed. The unemployment rate is therefore 10 percent.