The Four Types of Unemployment and Inflation via CPI
The four named types of unemployment and their causes, and how inflation is measured by the Consumer Price Index, with its two causes cost-push and demand-pull and its effects on people.
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Jobs and prices
Two things a government watches closely are how many people are out of work and how fast prices are rising. Economists sort unemployment into four types by its cause, and they track rising prices with a measure called the Consumer Price Index. This module covers the four types of unemployment and how inflation is measured.
Jobs and prices vocabulary
Learn these four terms before you study the detail.
Two causes of inflation
Prices can be pushed up in two different ways.
Name the type from the cause
A top answer names the exact type of unemployment from what caused it: an industry closing for good is structural, a job that only exists in season is seasonal, a short gap between jobs is frictional, and a downturn in the economy is cyclical. For prices, remember inflation is tracked by the CPI, and it is driven either by rising costs or by strong demand.
Match the type
- structural unemployment
- seasonal unemployment
- frictional unemployment
- cyclical unemployment
- an industry declines and its jobs go for good
- work is only available at certain times of year
- a short gap while moving between jobs
- a downturn in the economy cuts demand for workers
Match the price term
- inflation
- the CPI
- cost-push
- demand-pull
- a general rise in prices
- the measure that tracks a basket of prices
- prices rise because production costs more
- prices rise because demand is strong
Which type from a downturn?
Which type of unemployment is caused by a downturn in the economy?
- Cyclical unemployment.
- Seasonal unemployment.
- Frictional unemployment.
- Structural unemployment.
Causes of inflation
Select the TWO causes of inflation.
- Rising costs of production.
- Strong demand for goods.
- Prices steadily falling.
- The time of year.
How the CPI is worked out
Put the steps of measuring inflation with the CPI in order, earliest first.
- Choose a basket of goods people buy
- Record the prices of the basket
- Compare the prices with last year
- Work out how much they have changed
- Report the change as inflation
Complete the facts
Unemployment left when a whole industry shuts down for ever is _____. Unemployment that only happens at certain times of year is _____. A general rise in prices is called _____. Inflation is measured by the _____. When strong demand pulls prices up, this is _____ inflation.
Read the index
The Consumer Price Index was 100 one year and 104 the next. Subtract 100 from 104 to find how many points the index rose. What is the answer?
Effects of inflation
Tap the TWO effects of inflation on people.
- money buys less than before
- savings lose some of their value
- everything becomes cheaper
- everyone automatically gets richer
Name the unemployment
Read each case and choose the type of unemployment.
- A large mine closes for good and its workers have skills no other local employer needs. Which type is this?
- A seaside ice-cream seller has no work through the cold winter months. Which type is this?
- A recession means firms sell far less and lay off many workers across the country. Which type is this?
Explain jobs and prices
Explain the four types of unemployment and how inflation is measured and caused.
- Describe the four types of unemployment with a cause for each
- Explain how the CPI measures inflation
- Explain the two causes of inflation, cost-push and demand-pull