Question

3. Types of unemployment

The three people described in the following table are categorized as unemployed by the Bureau of Labor Statistics.

Identify each person in the table as structurally, frictionally, or cyclically unemployed.

Unemployment Type	Structural	Frictional	Cyclical
Lucia is a real estate agent. House sales in her area have declined because the region has been going through a recession. She has no clients and is currently looking for a new full-time job.
Ginny just graduated from college and is looking for a full-time position with an investment banking firm.
Eric left his job as a plumber when his wife took a position in another region. The quantity of plumbing services demanded is considerably lower in the new region, in part because of high union-negotiated wages. He would like to work at the high union wage but remains unemployed due to a lack of plumbing jobs.

The following table shows data on frictional, cyclical, structural, and total unemployment for an economy.

Unemployment Type	Rate
	(Percent)
Frictional	2.8
Cyclical	0.0
Structural	1.0
Total unemployment	3.8

True or False: This economy is not currently at its natural rate of unemployment.

True

False

Answer 1

1. Cyclical
(Lucia is cyclically unemployed as recession will be over in the future.)

2. Frictional
(Ginny is frictionally unemployed as she is searching for a job.)

3. Structural
(Eric is structurally unemployed because his plumbing services are no longer required.)

False
(As cyclical unemployment is 0, so, economy is at its natural rate of unemployment.)