CHAPTER 6: MACROECONOMICS PROBLEMS

UNEMPLOYMENT
SOLUTION OF 5 PAST YEAR QUESTIONS

Presented by:
Nur Hidayahtul Aina Binti Rafi
Hanisah Binti Mohd Razib
Azleen Arisya Binti Rosli
Nur Alisha Binti Roselan
Nur Faqrina Binti Tasalim
 JUNE 2019
PART B Q4
b) Discuss any four (4) tools of monetary policy used by the government to curb the high level of
unemployment. (10 marks)

1) Open market operations (0.5 m)

Explanation: The central bank may buy short-term bonds or government securities and treasury bills from
individuals, as well as institutions. (1 m)
Elaboration: The purchase of securities can increase money supply and increase the purchasing power of
individuals and firms. (1 m)

2) Lowering the reserves requirement (0.5 m)

Explanation: Reserves Requirement refers to the amount of reserves commercial banks are required to
keep in the central bank. (1 m)
Elaboration: During periods of unemployment, the central bank lowers this reserves requirement to
increase the cash resources of commercial banks, thereby encouraging the bank to offer more loans to the
public and businessman. (1 m)
3) Lowering the discount rate (0.5 m)
Explanation: The discount rate is also known as the bank rate. (1 m)
Elaboration: A decline in the discount rate is followed by a decline in other interest rates which leads to
increased borrowing and increased investment by private businessman. (1 m)

4) Lowering the interest rate (0.5 m)

Explanation: The central bank may persuade commercial banks to decrease their rates of interest on
deposits from the public. (1 m)
Elaboration: This action from commercial banks will reduce the level of savings and increase the purchase
of goods and services from the public. (1 m)
 DEC 18
PART B Q4
a) Differentiate between cyclical and structural unemployment. Give an example. (10 marks)

     
Cyclical unemployment  Structural unemployment

Unemployment that occurs when   Unemployment arises due to

there is lack of jobs that results structural changes in the
because of a downswing in a DEFINITION economy of country.
business cycle or recession.  

   
Demand deficient employment. CAUSES Advances in technology
 
 
Usually creates more Structural unemployment can
unemployment. EFFECT keep the unemployment rate high
long after a recession is over.
1- Expansionary fiscal policy or  
monetary policy to stimulate
the aggregate demand.
For example, when the  
economy falls into a downswing
or recession, the real GDP falls,
the demand for goods and
services decrease, companies
close down and workers were
laid off.
1- Relocation grants
WAYS TO OVERCOME 2- Training scheme
(government perspective) 3- Employer subsidies
For example, in the agricultural
sector, many unskilled and
inadequately educated workers
EXAMPLE are laid off because of modern
mechanization.
PART B Q4
JAN 2018
a) Discuss four (4) types of unemployment (10 marks)

1) Frictional unemployment (0.5 m)

Explanation: Occurs when people are in between jobs, entering and reentering the labour force. (1 m)
Example: Fresh graduates that is actively seeking for job (example for entering job). (1 m)

2) Seasonal unemployment (0.5 m)

Explanation: Arises due to a seasonal variation in the activities of industries such as climatic changes or
changes in fashion or by inherent nature of the industries themselves. (1 m)
Example: A fisherman who is unable to catch fish during winter or rainy weather. (1 m)
3) Cyclical unemployment (0.5 m)
Explanation: Occurs when there is lack of jobs that results because of a downswing in a business cycle
or recession. (1 m)
Example: When the economy falls into a downswing or recession, the real GDP falls, the demand for
goods and services decrease, companies close down and workers are laid off. (1 m)

4) Structural unemployment (0.5 m)

Explanation: Arises because the composition of the labour force does not respond quickly to meet
changing demands, technological changes or competition from imported goods and so on. (1 m)
Example: In the agricultural sector, many unskilled and inadequately educated workers are laid off
because of moderns mechanization. (1 m)
 JUNE 18 & MARCH 17
PART B Q4
(a) Explain any four (4) effects of unemployment. (10 marks)

1)  Waste of resources as there is a permanent loss of output of goods and services. (0.5m)
Explanation: An economy with high unemployment is not using all of their resources especially labour
available to it. (1m)
Elaboration: economy is operating below its production possibility frontier, reducing the economy’s
efficiency and production. (1m)
 
2) Social problems (0.5m)
Explanation: Unemployment results in lower morale and human suffering. The family unit will be affected if
the sole bread-winner loses his/her job. (1m)
Elaboration: Social problems arise if the unemployment turn to drugs or crime. (1m)
 
 
 3) Government will receive less taxation revenue (0.5m)
Explanation: Government need to pay more on unemployment benefits. (1m)
Elaboration: Therefore, less money to spend on other areas such as education and health. (1m)
 
4) Individuals will lose their job skills (0.5m)
Explanation: That will cause in loss of human capital (1m)
Elaboration: It will lead them to radical social and political activities by increasing crime rates (1m)

 
 MARCH 2013
PART B (QUESTION 3)
COMPONENT NUMBER OF PEOPLE (MILLIONS)
C) Under 16 (Not Labour Force) 50
Working full time (Labour Force) 90
Working part time (Labour Force) 30
Retired (Not Labour Force) 40
Unemployed (Labour Force) 5
  215
(Total Number of Population)

Using the above data, calculate Unemployment refers to

i) Unemployment rate (2 marks) people who are in the
working - age group (16 -
UNEMPLOYMENT RATE = NUMBER OF UNEMPLOYED / LABOUR FORCE × 100 64 years old) in the
labour forces that they
are currently not working
but are actively seeking
for a job
ii) Labour force (2 marks)
Labour force refers to
number of people who
are employed (fulltime
𝐋𝐀𝐁𝐎𝐔𝐑 𝐅𝐎𝐑𝐂𝐄
𝐋𝐀𝐁𝐎𝐔𝐑 𝐅𝐎𝐑𝐂𝐄𝐏𝐀𝐑𝐓𝐈𝐂𝐈𝐏𝐀𝐓𝐈𝐎𝐍𝐑𝐀𝐓𝐄= ×𝟏𝟎𝟎 or part time) plus the
𝐏𝐎𝐏𝐔𝐋𝐀𝐓𝐈𝐎𝐍 unemployed who are
looking for work.
LABOUR PARTICIPATION RATE
(Definition
of labour force)

 
THANK YOU