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Edexcel A-Level Economics AS 2.3.1 3b Causes of Unemployment Frictional Seasonal Structural Demand Deficiency Real Questions

Practise classifying and analysing frictional, seasonal, structural, demand-deficient and real-wage unemployment, then evaluate their relative importance.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
AS

Exam points

  • classify unemployment as frictional, seasonal, structural, demand deficient or real wage from context
  • analyse how falling AD from higher interest rates, taxes or lower spending creates demand-deficient unemployment
  • analyse structural unemployment through technological change, global competition or a skills-job mismatch
  • explain frictional job search, seasonal labour demand and real wage inflexibility from unions or wage floors
  • evaluate causes by duration, measurement limits, changing context and whether several causes operate together

Edexcel A-Level Economics AS 2.3.1 3b Causes of Unemployment Frictional Seasonal Structural Demand Deficiency Real Questions question 1

[Maximum number: 6]

Sources for use with Section C
The economy of China

Figure 1 Year on year real GDP growth rate by quarter, Q1 2020 to Q2 2022

Figure for Question Edexcel A-Level Economics AS 2.3.1 3b Causes of Unemployment Frictional Seasonal Structural Demand Deficiency Real Questions question 1 — Edexcel A-Level Economics AS

Figure 2 Youth unemployment rate (16 to 24 year olds), as measured by the International Labour Organization (ILO), January 2022 to June 2022

Figure for Question Edexcel A-Level Economics AS 2.3.1 3b Causes of Unemployment Frictional Seasonal Structural Demand Deficiency Real Questions question 1 — Edexcel A-Level Economics AS

Extract A Economic growth In the second quarter of 2022 China experienced a low rate of economic growth. This was as a result of domestic demand for goods and services, and exports rising more slowly compared with the previous quarter. Economists estimated that China’s economy would continue to experience a low rate of economic growth until the end 5 of the year. Therefore, the country’s economic growth forecast for 2022 was reduced from 5.5% to 4.3%. This low economic growth rate resulted in a further increase in the already high rate of youth unemployment. China has too many college and university graduates for the economy to employ. In 2022 there was also a mismatch between the jobs that are 10 available and students’ qualifications. For example, at the start of the third quarter of 2022, only 0.70 jobs were available for each graduate. To increase the rate of economic growth the Government implemented a reflationary fiscal policy. It increased spending on infrastructure by over $75 billion and reduced taxes for businesses. It planned to increase science and technology‑related 15 investments by providing 100% tax breaks on research and development spending. The country’s central bank, the People’s Bank of China (PBoC), implemented a reflationary monetary policy to increase the country’s economic growth rate. For example, the PBoC decreased the base rate of interest from 3.7% to 3.65% in August 2022. There was also a reduction in the reserve asset (liquidity) requirements 20 in November 2022. This was in contrast to the policy of central banks in several advanced economies which implemented deflationary monetary policy. One economist stated that “the room for manoeuvre” for a reflationary monetary policy by the PBoC was limited because of rising US interest rates. He also emphasised the risks associated with a fall in the external value of the Chinese 25 currency, the Renminbi.

With reference to Extract A, analyse two causes of China's high youth unemployment rate.

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