CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded
may be different.

Coursebook answers
Chapter 19
Economics in context
Learners’ discussion might include:
• There are a number of possible reasons. Firms may not be able to employ them if they lack sufficient
funds to pay their wages. They may also not be willing to employ them if they think demand will not
last or consumers may not be prepared to pay for them. The workers who could make them may not be
aware of the job vacancies, they may live in different areas and they may not like the wages or working
conditions on offer.
• The children of the unemployed may, for instance, have to leave school early and may not receive
good quality healthcare as parents may have low income. These disadvantages may reduce their
skills and qualifications and chances of gaining a job when they are adults. The experience of their
parents may also reduce their expectations of gaining a job and they may give up searching after a
short period of time.

Activities
Activity 19.1
Learners’ discussion might include:
1 Achieving higher qualifications may make women keener to pursue a career. This is because higher
qualifications will increase their chances of gaining a well-paid and interesting job. Well-qualified women
also tend to marry later and have fewer children which makes it more likely they will pursue a career.
2 Other factors may include: the wages on offer (the higher the wages, the more rewarding it will be
to find a job); non-wage benefits on offer (for instance, holidays); the need to earn an income (for
example, if an individual’s partner is made redundant, they may need to search for a job to maintain
the family); the provision of childcare (this would make it easier to combine work with raising a
family); the provision of adapted work places (enabling disabled people to work).

Activity 19.2
1 For example, using the 2019 version of the CIA World Factbook for Malaysia, learners’ answers
might include:
The unemployment rate was 3.4%.
The number of people unemployed was 0.51m (3.4% of a labour force of 14.94 m).

The labour force participation rate is 70.84% ( 14.94

21.09 m )
m
The labour force figure is given. The working

age population is calculated by adding the males and females in the 15–64 age groups.
2 Learners’ own answers.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

Activity 19.3
Learners’ answers might include:
1 A rise in a country’s output may be accompanied by a rise in employment as more workers may be
needed to produce the extra goods and services. More workers may work with more capital equipment.
However, it is possible that advances in technology and shifts from the primary to the secondary and
tertiary sectors may result in a rise in output without an increase in employment.
2 A reduction in the labour force participation rate may have a harmful effect on an economy if it is due
to an increase in discouraged workers. However, if it is due to a higher proportion of school leavers
going on to study at university, it can be a benefit in the long run. This is because the quality of the
labour force will increase.
3 Where two quantities have a direct, or even indirect, relationship, it is not possible to conclude that
one has influenced the other. It is important not to confuse correlation with causation. This is why it is
useful to consider whether economic analysis can explain any correlation or lack of correlation found.

Activity 19.4
1 Learners’ answers might include:
A U-shaped unemployment age distribution graph shows higher unemployment rates among young
and old workers. A higher proportion of young workers may be unemployed because they lack
experience, costs may be involved in training them and it may take time for them to find a suitable job.
It is possible that older workers may experience a higher rate of unemployment. This may be because
older workers may be out of date with advances in technology and may lack some physical strength.
2 Learners’ discussion might include:
Most other countries are likely to show that the unemployment rate is highest among the young. This
is because the lack of experience, need for training and time required to find a suitable job is likely to
apply to all countries whatever their industrial structure.
Whether the unemployment rate will be higher among older workers will depend on a number of
factors. These include the industrial structure as physical strength is more significant in e.g. agriculture
and mining. Other factors include the quality and availability of healthcare in the countries; other
advantages older workers may have include being less likely to leave to take up another job.

Activity 19.5
Learners’ answers/discussion might include:
1 Low-income countries’ unemployment figures based on a claimant count measure may understate
the full extent of unemployment because unemployment benefits may be low or non-existent.
Unemployed workers will have to find work quickly. This may be very low-paid work or work on
their family’s farms.
2 The decision of the government of Laos in 2017 to exclude subsistence farmers from its measure of
the labour force would have increased its unemployment rate. This is because any given number of
unemployed would account for a larger percentage of a smaller labour force.
3 A decrease in a country’s unemployment rate does not always indicate a fall in the number of people
without jobs. As well as different reasons for people ceasing to be unemployed, the unemployment rate
can be reduced by a change in the way the government measures either the size of the labour force
or unemployment.

Activity 19.6
Learners’ discussion might include:
1 A labour survey measure is likely to record a higher unemployment figure than the claimant count
as it will include those who are actively seeking employment but who are not entitled to receive
unemployment benefit or who chose not to apply for it.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

2 An increase in geographical labour mobility is likely to increase the difference between unemployment
measured by the claimant count and the labour force survey in China. This is because more people will
be away from where they could register to receive unemployment benefit. They will not be included in
the claimant count but will be included in the labour force measure.
3 As the answer to Q2 indicates, who is included in the claimant count can differ between countries. Not
all countries require the unemployed to register in their home towns to receive unemployment benefit
and the groups entitled to unemployment benefit can vary between countries. In contrast, the labour
force survey (ILO) measure includes the same people as unemployed.

Activity 19.7
Learners’ discussion might include:
1 a In theory, the voluntarily unemployed should not be counted as unemployed. This is because they
are not actively seeking employment. However, in practice, it is difficult to determine whether
someone is voluntarily unemployed. For instance, is someone who turns down a job that involves
very long hours and pays a very low wage, voluntarily unemployed?
b You could assess whether unemployment is voluntary or involuntary by asking the unemployed,
as the labour force survey does, whether they are seeking employment. However, they might lie.
You could ask for proof, such as job applications. These may be difficult to interpret as those who
do not want to work may apply for jobs they do not expect to get or may underperform at any
interviews they are asked to.
2 Learners’ own answers.

Activity 19.8
Learners’ answers might include:
1 a unemployed miners may not have filled job vacancies in financial services as they are unlikely to
have the skills and qualifications required. They may also live in different areas of the country.
b the type of unemployment that would arise if unemployed miners cannot gain jobs in another
industry is structural unemployment. The industrial structure of the country has changed with
the demand and supply of the products mined declining while the demand and supply of another
industry, in this case financial services, is increasing.
2 Some people become discouraged workers because, after a period of job search, they lose faith they
will find a job. As a result, they have given up looking for work.
3 Structural unemployment may result in discouraged workers for a number of reasons. One is that
the qualification the workers have and the skills that they have built up in one industry may not be
transferable to other industries. The workers may become frustrated in employers not being impressed
by their qualifications and skills. In some cases, some ex-miners may receive job offers in financial
services or more likely other industries, but the jobs may be in other areas of the country where housing
is more expensive. The families of ex-miners may not be prepared to move.

Think like an economist: Unemployment in Greece

Learners’ answers might include:
1 Aggregate demand and aggregate supply, demand and supply of a particular product, efficiency,
market failure (including information failure and lack of geographical and occupational mobility of
labour), production possibility curves and opportunity cost.
2 Possible suggested reasons: fewer job vacancies available, so the period of unemployment may be
longer; no state benefit or lower state benefits, so standard of living may fall; low or no savings held
by the unemployed to support them before they get another job; low labour mobility which is likely to
mean the unemployment will last longer.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

Activity 19.9
1 A zero rate of unemployment would mean that everyone who wants a job immediately gets one. This is
very unlikely to occur.
2 The unemployment rate may be low in a country with high incomes as demand in the country is likely
to be high and because anyone without a job may not identify as such, since they may be able to rely on
rich relatives.
3 The loss of jobs in Qatar results in a rise in the unemployment rate of other countries as migrant
workers may fail to find jobs when they return home.

Think like an economist: Long-term unemployment

Learners’ discussion might include:
It is important to compare different countries’ unemployment data from one source as unemployment taken
from different sources may use different measures and may have taken the figures at different time periods.

Exam-style questions: Multiple choice

1 D An increase in a country's unemployment rate, by definition, must mean that there is an increase
in the proportion of the labour force without jobs. A is a cause rather than a consequence of a rise
in the unemployment rate. In the case of B, the unemployed are not economically inactive. C – an
increase in the unemployment rate may mean an increase in the number of people unable to find
jobs. However, this is not always the case since there could be an increase in the unemployment
rate and fewer people unable to find jobs if the size of the labour force has fallen.
2 B A fall in a country’s unemployment rate means greater utilisation of existing resources. This is
shown by a movement from within the PPC towards the PPC. A shows a change in the allocation
of resources with the economy operating at full employment. C shows an increase in productive
capacity resulting from an increase in the quantity or quality of resources. D indicates an increase
in a country’s ability to produce consumer goods due to, for instance, greater productivity of
workers employed in the consumer goods industries.
3 B A reduction in gender discrimination in labour markets is likely to mean that more women will
enter the labour force. A rise in the size of the labour force could mean that both the number
of people employed and unemployed could rise. A, C and D would all reduce the size of the
labour force.
4 B Workers are frictionally unemployed when they are in between jobs. The farm workers may
gain new jobs when they find out about the job vacancies. A and C are examples of structural
unemployment, arising from changes in the pattern of demand (A) and the pattern of supply (C).
D is an example of cyclical unemployment.
5 A Cyclical unemployment is caused by a decrease in aggregate demand.
6 C One of the causes of frictional unemployment is information failure.
7 D Structural unemployment occurs when workers who have lost their jobs due to changes in the
structure of the economy experience difficulties switching from one type of job to another type
of job.
8 D Output is sacrificed as a result of unemployment. A and B are financial costs of unemployment.
In the case of C, more not less leisure may be experienced as a result of unemployment.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS

9 C Unemployment may give some people time to find a more suitable job. Unemployment is likely to
reduce tax revenue as incomes and spending are likely to decline. Wages are more likely to fall, or
at least remain unchanged as a result of unemployment especially if it is cyclical unemployment.
The existence of unemployment is also more likely to increase rather than reduce the number of
discouraged workers.
10 A A decrease in government spending on unemployment benefits may reduce the time the
unemployed spend between jobs. They may have a greater incentive to find work. B, C and D
are likely to increase the frictional rate. A decrease in the quality of labour market information,
unlike A, would increase frictional unemployment. C may also increase frictional unemployment
as higher income tax could reduce the gap between paid work and unemployment benefits. An
increase in trade union membership might result in wages being pushed above the equilibrium
level, and so causing some workers to lose their jobs.

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