1) Explain the three different types of unemployment. Give an example of each type. Given what you have learned about the different types of unemployment, suggest three policies that could be used to reduce unemployment, one for each type of unemployment.

2) Describe What is meant by the phrase "not in the labor force?" Give examples of why people might be in this state.

It means people over the age of fifteen who are not looking for work, either because they do not want a job or because they have given up looking. It might include retirees, full-time students, stay-at-home parents, individuals in institutions like prisons or mental hospitals or elderly parents.

Answer:

1) Unemployment refers to the state of being unemployed where people who are willing to and able to work are unable to find a job. There are three types of unemployment - frictional, structural and cyclical.  

Frictional unemployment occurs when new workers join the labor force and search for a job or the existing workers move out from one job and are in search of another job. It is also known as search unemployment. An example of frictional unemployment is college students looking for a job after graduating from college. A policy to reduce frictional unemployment is to provide information to workers about new jobs and vacancies so that they could find jobs easily and become unemployed for a shorter period of time.  

Structural unemployment occurs when there is a mismatch between the skills that are required by employers and the skills that the workers have. It can occur due to technical changes in the long-run. An example of structural unemployment is laying off of newspaper distribution workers are they are now available online. A policy to reduce structural unemployment is vocational programs by government to reduce the gap between the skills required and acquired.  

Cyclical unemployment refers to the unemployment that occurs due to fluctuations in the business cycle. When an economy is in recession, the firms lay off workers to avoid losses. It increases when the economy is in a recession and decreases when the economy is doing well. An example of cyclical unemployment is an increase in layoffs due to Covid-19. A policy to reduce cyclical unemployment is to increase demand and increase output by using expansionary monetary and expansionary fiscal policy.  

2) 'Not in the labor force' refers to the people who are neither consider employed nor unemployed. It includes people who are above the age of fifteen and are not looking for work. It includes students, ill or disabled people, retired people, stay-at-home family members like a mother taking care of her children and discouraged workers. The discouraged workers refer to people who are not actively seeking employment and who have been long-term unemployed. They are willing to work but have been discouraged by not finding a suitable job for them for a long time. The students are considered out of the labor force because they focus on their studies and are going to school or college. Mother may not work as they have home responsibilities. The retired people are not counted in the labor force as they have taken retirement. The health of ill and disabled people may not allow them to work or they may not find a suitable job for them.