Cambridge A Level Economics: Employment, unemployment and labour mobility (9708) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 9.3 (Employment/unemployment), outcomes 9.3.1 to 9.3.7, of the Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028. Topic 9 is A Level content only. All countries and figures are invented for illustration and are not real statistics. Each answer step carries a mark in square brackets, and the bold figure at the end is the question total. Draw any diagram described before you read the answer.

Links: study guide, revision notes, course hub, checklist and the free 10-minute diagnostics.

Questions

1. Define full employment. [2]

2. In Country D the labour force is 12.5 million and 11.7 million people are employed. Calculate the unemployment rate. [2]

3. Country A has a labour force of 15.0 million and 1.0 million unemployed people: 0.45 million structurally, 0.20 million frictionally and 0.35 million cyclically. (a) Calculate the unemployment rate. [1] (b) Treating the natural rate as frictional plus structural unemployment, calculate it as a percentage of the labour force. [2] (c) Calculate the cyclical unemployment rate in percentage points. [1]

4. In a labour market, w is the hourly wage in cu (currency units) and quantities are in thousands of workers. Demand is L = 900 − 30w and supply is L = 30w − 300. (a) Find the market-clearing wage and the number employed there. [2] (b) A legal minimum wage of 26 is then set. Calculate employment, the labour supplied and unemployment. [3] (c) Explain whether this unemployment is voluntary or involuntary, and why cutting the minimum wage back to 20 would not create jobs for all of it. [3]

5. Explain hysteresis in the labour market. [4]

6. Explain two factors that could raise a country’s natural rate of unemployment. [4]

7. A job pays 10 cu an hour for 40 hours a week and is taxed at 15%. Out-of-work benefit is 150 cu a week. (a) Calculate the replacement rate. [3] (b) Explain how a rise in the replacement rate could affect voluntary unemployment. [2]

8. A worker can earn 6,000 cu a year more in another city, but pays 3,000 cu a year more in rent. Moving costs 15,000 cu once. (a) Calculate the payback period. [3] (b) Explain two factors, other than cost, that limit geographical mobility. [4]

9. The government of Country G raises spending by 0.8 billion cu. The marginal propensity to consume is 0.75, and there are no taxes or imports. Each extra worker produces 40,000 cu a year. Cyclical unemployment is 200,000. (a) Calculate the multiplier, the rise in national income and the number of jobs created. [4] (b) Explain why the fall in unemployment might be smaller than this. [3]

10. A wage subsidy costs 4,000 cu per subsidised job, but half of those jobs would have existed anyway. A training scheme costs 2,500 cu per trainee, and 25% of trainees gain a job they would not otherwise have found. (a) Calculate the cost per additional job for each policy. [3] (b) Explain one reason why the cheaper policy may still be less effective. [2]

11. The table shows Country E, whose working-age population is 22.0 million in every year. Figures are in millions.

Year	Employed	Unemployed
1	15.0	0.9
2	14.1	1.8
3	14.3	1.6
4	14.8	1.2
5	15.2	1.0

(a) Calculate the unemployment rate in years 2 and 5. [3] (b) Calculate the employment rate in years 1 and 5. [2] (c) The year 5 unemployment rate is above that of year 1. Explain two possible reasons. [4]

12. Assess the view that a government should rely on supply-side measures, rather than changes in aggregate demand, to cut unemployment. [10]

Answers

1. Full employment is the position where all those prepared and able to work at the prevailing wage can obtain a job [1], although some frictional and structural (natural) unemployment remains [1]. [2] Examiner insight: “No unemployment” is a common slip. Naming what remains is what separates a full definition from a partial one.

2. Unemployed = 12.5 − 11.7 = 0.8 million [1]. Rate = 0.8 ÷ 12.5 × 100 = 6.4% [1]. [2] Examiner insight: Show the labour force as the denominator. A bare percentage with no working leaves the reader unable to follow your steps.

3. (a) 1.0 ÷ 15.0 × 100 = 6.7% [1] (b) Natural = 0.45 + 0.20 = 0.65 million [1]; 0.65 ÷ 15.0 × 100 = 4.3% [1] (c) 6.7 − 4.3 = 2.3 percentage points (0.35 ÷ 15.0 × 100) [1] [4] Examiner insight: Keep unrounded figures until the end. Rounding 6.7 and 4.3 first still gives 2.4, which drifts from the exact 2.3.

4. (a) 900 − 30w = 30w − 300 → 60w = 1,200 [1] → w = 20, employment = 300 thousand [1] (b) Employment = demand = 900 − 780 = 120 thousand [1]; labour supplied = 780 − 300 = 480 thousand [1]; unemployment = 480 − 120 = 360 thousand [1] (c) The 360 thousand are willing to work at 26 and cannot find jobs, so it is involuntary [1]. At 20 there would be no involuntary unemployment [1]. A fall from 26 to 20 raises employment only from 120 to 300 thousand, while labour supplied falls from 480 to 300, because 180 thousand would not offer labour at 20 [1]. [8] Examiner insight: Read employment from the demand curve at the floor, not from supply. Candidates who quote the supply figure as employment overstate jobs.

5. Hysteresis is unemployment that persists after the original cause has ended [1] because the equilibrium rate itself has risen [1]. A long spell of joblessness makes skills decay and contacts fade, and employers may treat the gap as a warning sign [1], so cyclical unemployment becomes structural and stays high after demand recovers [1]. [4] Examiner insight: Link cause to consequence. Listing “skills decay” with no step to the higher natural rate is a description, not an explanation.

6. Factor 1, for example generous long-lasting benefits [1]: they raise the reservation wage and lengthen search, so voluntary and frictional unemployment rise [1]. Factor 2, for example a skills mismatch [1]: workers laid off from declining industries lack the skills for vacancies, so structural unemployment rises [1]. [4] Examiner insight: Two developed factors tend to earn more than four listed ones. Say why each moves the natural rate, not just that it does.

7. (a) Net pay = 10 × 40 × (1 − 0.15) [1] = 340 cu [1]; replacement rate = 150 ÷ 340 × 100 = 44.1% [1] (b) A higher replacement rate narrows the gap between benefit and pay [1], so some workers refuse low-paid jobs or search longer, raising voluntary unemployment [1]. [5] Examiner insight: Use net pay (after tax) as the denominator. Using gross pay gives a different rate.

8. (a) Net annual gain = 6,000 − 3,000 = 3,000 cu [1]; payback = 15,000 ÷ 3,000 [1] = 5.0 years [1] (b) Family and community ties [1] raise the non-money cost of moving, so some workers stay despite a pay gain [1]. Poor information about vacancies elsewhere [1] means workers may not know the gain exists [1]. [7] Examiner insight: “Other than cost” rules out housing and moving costs. Repeating them gains nothing.

9. (a) Multiplier = 1 ÷ (1 − 0.75) = 4 [1]; rise in income = 0.8bn × 4 = 3.2 billion cu [1]; jobs = 3.2bn ÷ 40,000 [1] = 80,000 [1] (b) In practice taxes and imports leak from the circular flow (the question assumed none), so the multiplier would be smaller [1]. Some firms raise prices or hours rather than hiring [1]. Unemployed workers may lack the skills for the vacancies, so structural unemployment remains [1]. [7] Examiner insight: “Fewer jobs” needs a reason tied to the model. Naming leakages or a skills mismatch is a causal point.

10. (a) Subsidy: 4,000 ÷ 0.50 = 8,000 cu [1]. Training: 2,500 ÷ 0.25 = 10,000 cu [1]. The subsidy is cheaper per additional job [1]. (b) A subsidy may end the job when payments stop [1], whereas training raises productivity and lasting employability [1]. [5] Examiner insight: Divide by the share who gain, not multiply. The cost per additional job is always at least the cost per participant.

11. (a) Year 2 labour force = 15.9; rate = 1.8 ÷ 15.9 × 100 = 11.3% [1]. Year 5 labour force = 16.2 [1]; rate = 1.0 ÷ 16.2 × 100 = 6.2% [1] (b) Year 1: 15.0 ÷ 22.0 × 100 = 68.2% [1]. Year 5: 15.2 ÷ 22.0 × 100 = 69.1% [1] (c) Participation has risen (labour force 15.9 to 16.2 million), so more people are looking for work, and employment has not grown as fast [2]. Hysteresis may have raised the natural rate after the year 2 downturn, through skill loss among the long-term unemployed [2]. [9] Examiner insight: Use the data. Quoting the rise in the labour force turns a general point into an evaluated one.

12. Supply-side policies (training, incentives, mobility help) tackle structural, frictional and voluntary unemployment and so lower the natural rate [1]; they shift LRAS right [1]. Training raises skills and occupational mobility, which helps where jobs exist but workers lack the skills [2]. Demand-side policy raises AD and reduces cyclical unemployment quickly [1]. Beyond the natural rate it causes an inflationary gap, so the gain is temporary [1]. Evaluation: supply-side effects are slow, costly and uncertain [1]; in a deep recession with hysteresis, demand-side action is needed first [1]. The best choice depends on the type of unemployment, so a mix is likely to work best [1] and a reasoned judgement follows [1]. [10] Examiner insight: A judgement that depends on the type and cause of unemployment, supported by your earlier analysis, tends to read better than a list of pros and cons.

Where marks are usually lost

• Defining full employment as zero unemployment.
• Dividing unemployment by the entire population instead of the labour force.
• Placing a wage floor below the equilibrium wage on a diagram.
• Reading employment from supply rather than demand at a wage floor.
• Treating all benefits-related unemployment as involuntary.
• Listing mobility factors without saying which type of mobility they affect.
• Applying demand-side policy to structural unemployment without comment.
• Concluding without a judgement about which policy suits which cause.

Next steps

• Revisit the revision notes and the study guide.
• Tick off outcomes on the checklist and see the course hub.
• Take the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Official syllabus

Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028, section 9.3 Employment/unemployment (Cambridge University Press & Assessment).