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Knowing the different types of unemployment and when they occur is an integral part of the AP Macroeconomics syllabus. Thus, understanding the characteristics of the different types of unemployment is necessary. Unemployment comes in three forms- cyclical, structural, and frictional. 

Cyclical Unemployment: 

  • Cyclical unemployment is the result of a downturn in the business cycle. 
  • This type of unemployment is temporary and only occurs when there is a contraction in the economy.
  • An example of cyclical unemployment is someone who is laid off because a company isn't selling enough due to a recession and can't afford to pay them. 

Structural Unemployment: 

  • Structural unemployment occurs when the skills of workers do not meet the skills demanded of such workers by employers. 
  • This type of unemployment often occurs as a result of technological change, resulting in workers’ skills becoming obsolete.
  • An example of structural unemployment is a typewriter repairman. While they may have been necessary in the 1950s, nobody has a typewriter anymore and thus the typewriter repairman is out of a job.

Frictional Unemployment: 

  • Workers are between jobs
  • Workers have just entered the workforce and are yet to find a job. 
  • An example of someone who is frictionally unemployed is someone who quits a job and is looking for a new one.

Finally, the concept of the natural rate of unemployment is key to understanding unemployment in the macroeconomy. 

  • The natural rate of unemployment is defined as the combination of structural and frictional unemployment present in a efficient expanding economy in macro equilibrium. 
  • Basically, it means that there is no cyclical unemployment, not no unemployment at all. There will ALWAYS be some frictional and structural unemployment, as there will always be people in between jobs or without necessary skills for a job
  • In the United States, this rate is between 4-6%, which is why aiming for a 0% rate of unemployment is dangerous to the health of our economy. 
  • At 0% unemployment, inflation would be high, rising prices

I hope you found this article helpful! Good luck on acing your AP Macroeconomics exam with Fiveable!

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