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Lecture 6

MGEB06H3 Lecture 6: Ch6-Unemployment-slides(1)

Economics for Management Studies
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Duration of Unemployment equals the average length of time a person
remains unemployed. It depends on:
SCyclical (SR) factors
SStructural (LR) factors such as
Sthe organization of the labour force;
Sthe demographic make-up of the labour force;
Sthe availability of U benefits; and
Sthe desire of some unemployed to continue to search for jobs
Frequency (Incidence) of Unemployment which equals the average
number of times, per period, that a worker becomes unemployed. It
depends on:
SThe variability of the demand for labour across different firms; and
SThe rate at which new workers enter the workforce.
(both depend on SR & LR factors)
These two sets of factors determine the Natural Rate of Unemployment.
UR s
Since these factors change over time so does the natural rate.
Unemployment Pool (U) Y
ZEmployment (E)
[ \
[ \
Not In Labour Force (NILF = WAP - LF)
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