Cambridge O Level Economics: Employment and unemployment (2281) – 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 4.7 (4.7.1 to 4.7.6) of the Cambridge O Level Economics (2281) syllabus for examination in 2026, version 2. There are no tiers. The setting of every question is fictional, and the numbers are chosen only to practise the method. Before attempting them, work through the study guide and the revision notes. Other links: the Cambridge O Level Economics hub, the printable checklist and the free diagnostics. Write your own answer before reading the worked one.

Questions

1. (a) Define unemployment. [2] (b) Explain why full employment does not mean that nobody is unemployed. [2]

2. Country P (illustrative) has 2,350,000 people in employment and 150,000 people unemployed. Calculate the unemployment rate. [3]

3. The table shows labour market data for Country Q (illustrative).

	Year 1	Year 2
Employed	2,350,000	2,410,000
Unemployed	150,000	190,000

(a) Calculate the unemployment rate in each year, to 1 decimal place. [4] (b) Employment rose, yet the rate rose. Explain how this is possible. [2]

4. In Country R (illustrative) the labour force is 2,800,000 and the claimant count is 126,000. A labour force survey questions 1,200 people in the labour force and finds 72 unemployed. (a) Calculate the unemployment rate shown by the survey. [1] (b) Use it to estimate the number unemployed in Country R. [2] (c) State the difference between the survey estimate and the claimant count. [1] (d) Explain one reason for the difference. [2]

5. The unemployment rate in Country S (illustrative) is 6.5% and its labour force is 3,200,000. Calculate the number employed. [3]

6. Country T (illustrative) has a labour force of 2,000,000. Unemployment is made up of 25,000 frictional, 82,000 structural and 53,000 cyclical. (a) Work out the unemployment rate. [2] (b) Calculate the rate if the cyclical unemployment were removed, to 1 decimal place. [3] (c) Explain why unemployment would still remain. [2]

7. Tertiary workers were 30% of 4,000,000 employed people in Country U (illustrative) in an early year and 62% of 4,000,000 in a later year. (a) Calculate the increase in the number of tertiary workers. [3] (b) Explain two reasons why the tertiary share rises as an economy develops. [4]

8. Country V (illustrative) has 1,700,000 women in a labour force of 4,000,000. Years later it has 2,300,000 women in a labour force of 4,600,000. (a) Calculate women’s share of the labour force in each year. [2] (b) Explain two reasons for the change. [4]

9. (a) Explain why the public sector’s share of employment falls as a country moves towards a market economy. [3] (b) The formal economy in Country W (illustrative) rises from 35% to 55% of 5,000,000 workers. Calculate the increase in formal workers. [2] (c) Explain one cause of the rise. [2]

10. Unemployment in Country X (illustrative) rises by 50,000. Each unemployed person pays 1,200 less tax and receives 2,000 in benefit a year, and would have produced 11,000 of output (invented currency units). (a) Calculate the annual fiscal cost. [2] (b) Calculate the output lost. [1] (c) Explain one consequence for individuals and one for firms. [4]

11. Country Y (illustrative) mainly has structural unemployment. It considers two schemes. Training costs 24,000,000 for 8,000 trainees, and 60% find jobs. A hiring subsidy costs 9,000,000 and creates 1,500 jobs. (a) Calculate the cost per job of the training scheme. [3] (b) Calculate the cost per job of the subsidy. [1] (c) Evaluate which scheme is better for Country Y. [6]

12. Country Z (illustrative) has high unemployment caused by falling demand in a recession. Discuss whether cutting interest rates is an effective way to reduce unemployment. [6]

Answers

1. (a) Unemployment is where people are without a job [1] but are willing and able to work and looking for it [1]. [2] (b) Some people are always between jobs or changing industry [1], so frictional unemployment remains even when there is a job for everyone who wants one at the going wage [1]. [2] Examiner insight: A definition that says only “without a job” gains little, because students and retired people are also without jobs. Add the willing-and-looking condition.

2. Labour force = 2,350,000 + 150,000 = 2,500,000 [1]. Rate = 150,000 ÷ 2,500,000 × 100 [1] = 6.0% [1]. [3] Examiner insight: The denominator is the labour force, not employment. Dividing by 2,350,000 gives 6.4%, which is the usual wrong answer.

3. (a) Year 1: labour force 2,500,000 [1], rate = 150,000 ÷ 2,500,000 × 100 = 6.0% [1]. Year 2: labour force 2,600,000 [1], rate = 190,000 ÷ 2,600,000 × 100 = 7.3% [1]. [4] (b) The labour force grew by 100,000 [1] while employment grew by only 60,000, so more people entered the labour force than found jobs and unemployment rose by 40,000 [1]. [2] Examiner insight: Quote the figures from the table in (b). The point is a comparison of two changes, so name both.

4. (a) 72 ÷ 1,200 × 100 = 6.0% [1]. [1] (b) 0.06 × 2,800,000 [1] = 168,000 [1]. [2] (c) 168,000 − 126,000 = 42,000 [1]. [1] (d) Some unemployed people want work but do not claim benefit, for example because they are not entitled to it [1], so the claimant count misses them while the survey asks all sampled people about job-seeking [1]. [2] Examiner insight: A reason must say who is missed or counted differently. “The survey is more accurate” is a claim without a reason.

5. Unemployed = 0.065 × 3,200,000 [1] = 208,000 [1]. Employed = 3,200,000 − 208,000 = 2,992,000 [1]. [3] Examiner insight: This is the formula run backwards. Stopping at 208,000 answers a different question, since the number unemployed is not the number employed.

6. (a) Unemployed = 25,000 + 82,000 + 53,000 = 160,000 [1]. Rate = 160,000 ÷ 2,000,000 × 100 = 8.0% [1]. [2] (b) Remaining unemployed = 25,000 + 82,000 = 107,000 [1]. Rate = 107,000 ÷ 2,000,000 [1] × 100 = 5.4% (5.35 rounded) [1]. [3] (c) Frictional unemployment remains because people take time to find jobs [1], and structural unemployment remains because skills or locations do not match vacancies [1]. [2] Examiner insight: Subtract only the type asked about. Removing the wrong group is a common slip, so write out the remaining figure.

7. (a) Earlier: 0.30 × 4,000,000 = 1,200,000 [1]. Later: 0.62 × 4,000,000 = 2,480,000 [1]. Increase = 1,280,000 [1]. [3] (b) Rising incomes lead households to spend more on services such as health and tourism [1], so more workers are needed in the tertiary sector [1]. Machinery raises output per worker in farming, so fewer primary workers are needed [1], and they move into other sectors [1]. [4] Examiner insight: Each reason should carry a “so” step that links the cause to the shift in jobs. A list of sector names with no cause earns little.

8. (a) Earlier: 1,700,000 ÷ 4,000,000 × 100 = 42.5% [1]. Later: 2,300,000 ÷ 4,600,000 × 100 = 50.0% [1]. [2] (b) Social attitudes change, so paid work for women is more accepted [1] and more women seek jobs [1]. More girls complete education, so more women qualify for jobs [1] and laws against discrimination make hiring easier [1]. [4] Examiner insight: A reason such as “more equality” is too vague. Say what changed and how it brought more women into the labour force.

9. (a) The government sells or closes state-owned firms [1], so private firms supply more of the goods and services [1] and they employ a bigger share of workers [1]. [3] (b) 0.35 × 5,000,000 = 1,750,000 and 0.55 × 5,000,000 = 2,750,000 [1]. Increase = 1,000,000 [1]. [2] (c) Larger registered firms replace small unrecorded traders [1], offering contracts and recorded jobs [1]. [2] Examiner insight: In (a) the chain runs from policy to who supplies to who employs. Skipping the middle step leaves the answer as a statement rather than an explanation.

10. (a) Cost per person = 1,200 + 2,000 = 3,200 [1]. Total = 50,000 × 3,200 = 160,000,000 [1]. [2] (b) 50,000 × 11,000 = 550,000,000 [1]. [1] (c) Individual: lower income lowers living standards [1], and skills and confidence fade the longer the spell lasts [1]. Firm: unemployed households spend less [1], so the firm’s sales and profit fall [1]. [4] Examiner insight: Keep the two groups separate. Credit goes to each consequence that is developed, so give one cause-and-effect chain for each group.

11. (a) Jobs found = 0.60 × 8,000 = 4,800 [1]. Cost per job = 24,000,000 ÷ 4,800 [1] = 5,000 [1]. [3] (b) 9,000,000 ÷ 1,500 = 6,000 [1]. [1] (c) Training costs less per job (5,000 against 6,000) [1] and creates 4,800 jobs against 1,500, a larger effect [1]. Training tackles the cause of structural unemployment, the skills mismatch [1], and the jobs are likely to last [1]. However, results come slowly and only 60% find work [1]. A subsidy is faster and may help people who cannot retrain, so the best choice is training, possibly with a subsidy for hard-to-place workers, which is a judgement [1]. [6] Examiner insight: Finish with a verdict that rests on the comparison you have just made. Repeating the cost figures without a verdict leaves the answer as description only.

12. Lower interest rates make borrowing cheaper [1], so households and firms spend and invest more [1], total demand rises [1] and firms hire to meet it, which suits cyclical unemployment [1]. However, in a recession confidence may be low, so people and firms may not borrow [1]. Effects take time, and a judgement is needed: it is likely to help if confidence returns, but it works best alongside other policies [1]. [6] Examiner insight: Write the chain in order, from rate to borrowing to demand to jobs. A strong answer states why the policy might fail in this particular case.

Where marks are usually lost

• Dividing the number unemployed by the number employed.
• Forgetting that the labour force is employed plus unemployed.
• Leaving out the percentage sign or the rounding the question asks for.
• Defining unemployment as “no job” without “willing, able and looking”.
• Explaining a type of unemployment without its cause.
• Giving two reasons that are really the same point.
• Recommending a policy that does not match the type of unemployment.
• Ending an evaluation without a judgement.

Next steps

• Re-read the revision notes and the study guide.
• Visit the Cambridge O Level Economics hub and tick off topics on the printable checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge O Level Economics (2281) syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment: section 4.7 Employment and unemployment, covering 4.7.1 to 4.7.6.