Chapter 23, Problem 8P

To determine

The likely effect of the breakdown of the job-for-life system in Japan on the Japanese natural rate of unemployment.

Concept Introduction:

Unemployment Rate: Unemployment rate refers to the measure of the total unemployed population, voluntarily or involuntarily, within the given area out of the total existing population.

Types of Unemployment: There are three types of unemployment as given below:

• Cyclical Unemployment: When the economy faces recession, many people lose their jobs and face unemployment and when the recession period is over, people get back to their jobs. This cycle is known as cyclic unemployment.
• Structural Unemployment: With the change in time, the demand for some skills increases in the employees. When the demand for a specific skill increases, the people who do not possess that skill get unemployed. This is known as structural unemployment.
• Frictional Unemployment: Sometimes, people may be voluntarily out of job due to reasons like, looking for better opportunities or moving to a new location. This is referred to as frictional unemployment.

Natural Rate of Unemployment: It refers to that rate of unemployment which is minimum and persists in the economy at all times. It includes frictional as well as structural unemployment.

Gross Domestic Product: It refers to the gross money value or gross market value of all finished goods and the services produced by the normal resident and non-resident people of the country that is within the borders of the country in an accounting period.