QUESTION 47 (4 marks)
A business keeps every employee but reduces each person’s weekly hours from 38 to 24. All employees want and are available for their former hours. Explain why the unemployment rate may be unchanged and why labour underutilisation rises.
Practice marking scheme
Answer
Workers remain employed, but underemployment increases.
Working
They still have paid work, so they are not unemployed under the stated definition. Their hours are below the amount they want and are available to supply. This creates underemployment and reduced labour utilisation despite an unchanged unemployment headcount. Household income and consumption can fall, weakening AD.
Marking criteria
- Explains continued employment status. [1 mark]
- Explains underemployment and underutilisation. [2 marks]
- Links lower hours to income and demand. [1 mark]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
View the QCAA syllabusCompare your working with the guide above.