OCR A Level Economics: Unemployment and employment (H460) – 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 the Unemployment/Employment topic of the OCR A Level Economics (H460) specification, Version 3.0 (June 2026), first assessment 2021, from the Economic policy objectives area of Component 2. The whole specification is A Level. All data are invented; Country C is a made-up economy. If a topic feels shaky, read the study guide or the revision notes first. Track progress on the OCR A Level Economics hub and the printable checklist. The free diagnostics show where to start.

Questions

1. Explain what is meant by the macroeconomic policy objective of full employment. [3]

2. Country C has 18.0m people aged 16 and over, of whom 11.0m are employed and 0.55m are unemployed. Calculate:

(a) the labour force [1] (b) the unemployment rate, to one decimal place [1] (c) the employment rate, to one decimal place [1] (d) the inactivity rate, to one decimal place [1]

3. In Country C the Labour Force Survey measure of unemployment is 0.55m and the claimant count is 0.40m.

(a) Calculate the gap as a percentage of the Labour Force Survey figure, to one decimal place. [2] (b) Explain two reasons why the two measures differ. [2]

4. Of Country C’s 0.55m unemployed, 0.15m are frictional, 0.30m structural and 0.10m cyclical.

(a) Calculate the natural rate of unemployment, to one decimal place. [2] (b) Calculate the cyclical unemployment rate, to one decimal place. [1]

5. In a simple model, inflation = expected inflation + 0.4 × (4.5 − u), where u is the unemployment rate in per cent and 4.5% is the NAIRU.

(a) Calculate inflation when u = 3.5% and expected inflation is 1.5%. [2] (b) If expectations rise to match, calculate inflation in the following year at the same u. [1] (c) Explain what the results show about NAIRU. [2]

6. Country C has a labour force of 11.55m, of whom 0.55m are unemployed, and 11.0m in work. In addition 0.45m inactive people want work but have stopped searching, and 0.6m part-timers want full-time hours.

(a) Calculate the unemployment rate if the discouraged workers are added to both the unemployed and the labour force. [2] (b) Calculate underemployment as a percentage of those in work. [1] (c) Explain one reason why the headline rate may mislead. [2]

7. A sector’s labour market (thousands of workers, w in pounds per hour): demand L = 90 − 3w, supply L = −18 + 6w.

(a) Calculate the market-clearing wage and the number employed. [2] (b) Bargaining raises the wage to £14. Calculate the unemployment that results. [2] (c) Using midpoints, calculate the wage elasticity of demand for labour between £12 and £14, and state what it implies for the wage bill. [3]

8. Evaluate the view that demand-deficient unemployment is the main cause of unemployment in a developed economy. [8]

9. In a recession Country C’s unemployment rises by 0.3m. Each unemployed person would have paid £4,800 in tax and contributions and receives £6,200 in benefits. Output per worker is £48,000 and GDP is £900bn.

(a) Calculate the fiscal cost and the lost output, and express lost output as a percentage of GDP. [4] (b) Explain one consequence of long-term unemployment for an individual, other than lost income. [2]

10. Country C employment, in millions:

Sector	Year 1	Year 12
Primary	0.5	0.3
Secondary	2.9	2.4
Tertiary	7.6	8.3

(a) Calculate the change in the tertiary share of employment, in percentage points to one decimal place. [3] (b) Explain two causes of the change in the pattern of employment. [4]

11. Evaluate the view that the consequences of unemployment fall mainly on the unemployed themselves. [9]

12. In Country C unemployment is below its NAIRU. Money wages rise 5% and productivity rises 1.5%.

(a) Calculate the rise in unit labour costs, to one decimal place. [2] (b) Evaluate the effects of full employment on an economy. [8]

Answers

1. Full employment means that anyone prepared and able to work at current pay rates can find a job [1]. It does not mean zero unemployment [1], because frictional and some voluntary unemployment remain as people move between jobs [1]. Examiner insight: Say what full employment excludes as well as what it includes. A bare definition that implies nobody is ever jobless is the common weak answer.

2. (a) 11.0 + 0.55 = 11.55m [1] (b) 0.55 ÷ 11.55 × 100 = 4.8% [1] (c) 11.0 ÷ 18.0 × 100 = 61.1% [1] (d) inactive = 18.0 − 11.55 = 6.45m, so 6.45 ÷ 18.0 × 100 = 35.8% [1] Examiner insight: Write the formula and the substitution. Using the labour force as the denominator for the employment rate is the usual slip, and visible working lets an examiner see which denominator you chose.

3. (a) Gap = 0.55 − 0.40 = 0.15m [1]; 0.15 ÷ 0.55 × 100 = 27.3% [1] (b) Any two, each explained: claimant count leaves out jobless people who do not claim, perhaps because household savings or a partner’s pay rule out support [1]; claimant count can include people not seeking work or in low-paid work, and responds to benefit rule changes, whereas the survey applies a search-and-availability test [1]. Examiner insight: Reasons need to point to who is in one count and not the other. “One is more accurate” is not an explanation without that detail.

4. (a) Natural rate counts frictional and structural: 0.15 + 0.30 = 0.45m [1]; 0.45 ÷ 11.55 × 100 = 3.9% [1] (b) 0.10 ÷ 11.55 × 100 = 0.9% [1] Examiner insight: State which categories form the natural rate. Including cyclical unemployment in it is a frequent error, and stating the components shows your reasoning.

5. (a) u is below NAIRU so the gap is 4.5 − 3.5 = 1.0 [1]; inflation = 1.5 + 0.4 × 1.0 = 1.9% [1] (b) 1.9 + 0.4 × 1.0 = 2.3% [1] (c) Holding unemployment below NAIRU makes inflation rise each year [1], so only at 4.5% is inflation stable, which is what non-accelerating means [1]. Examiner insight: Link the numbers back to the concept. Quoting the results without saying what they show about NAIRU leaves the explanation incomplete.

6. (a) (0.55 + 0.45) ÷ (11.55 + 0.45) = 1.00 ÷ 12.0 [1] = 8.3% [1] (b) 0.6 ÷ 11.0 × 100 = 5.5% [1] (c) Discouraged workers are classed as inactive so they do not appear in unemployment [1]; the headline rate therefore understates spare labour capacity compared with the broader 8.3% [1]. Examiner insight: Use the figures given. Naming a limitation and then quantifying it from the data is stronger than listing limitations without evidence.

7. (a) 90 − 3w = −18 + 6w [1] gives w = £12 and L = 54 thousand [1] (b) At £14, demand = 90 − 42 = 48 and supply = −18 + 84 = 66 [1]; unemployment = 18 thousand [1] (c) Employment falls 6 on a midpoint of 51: −11.76%; wage rises 2 on a midpoint of 13: 15.38% [1]; elasticity = −11.76 ÷ 15.38 = −0.76 [1]; inelastic, so the wage bill rises (from £648 to £672 thousand per hour) [1] Examiner insight: Work out both percentage changes first, then divide, then say what an inelastic result means for the bill. A correct number with no interpretation leaves the second half of the question unanswered.

8. Credit points like these, each developed:

• Cyclical unemployment arises when aggregate demand falls, so output and jobs fall together [1], and it is large in deep recessions [1].
• Structural unemployment arises from skills and location mismatch after industry decline or technology change [1], and it lasts longer, so it can be larger in the long run [1].
• Real-wage, frictional and seasonal causes also exist; wage floors cut jobs where labour demand is elastic [1].
• Judgement: the answer depends on the stage of the cycle, the country and the time period [1], evidence on duration and regional spread matters [1], and I conclude which cause dominates, with a reason [1]. Examiner insight: A one-sided account of demand deficiency stays descriptive. Compare causes, and finish with a supported conclusion about “main”.

9. (a) Fiscal cost per person = 4,800 + 6,200 = £11,000 [1]; for 0.3m: £3.3bn [1]; lost output = 0.3m × £48,000 = £14.4bn [1]; 14.4 ÷ 900 × 100 = 1.6% of GDP [1] (b) Skills and confidence decline during long spells [1], so employers may see the person as less employable and later pay is lower (a scarring effect) [1]. Examiner insight: Keep fiscal cost (tax lost plus benefits paid) separate from lost output. Adding them without explanation, or giving only one, loses clarity.

10. (a) Totals: year 1 = 11.0m, year 12 = 11.0m [1]; tertiary share 7.6 ÷ 11.0 = 69.1% and 8.3 ÷ 11.0 = 75.5% [1]; change = +6.4 percentage points [1] (b) Rising incomes shift spending towards services [1], so tertiary employment grows as demand for services rises [1]; automation or imports reduce secondary and primary jobs [1], which cuts their share and leaves displaced workers needing new skills [1]. Examiner insight: Percentage points and per cent are different. Quote the unit, and tie each cause to the sector it moves.

11. Credit points like these, each developed:

• Individuals lose income, health and skills, and the harm grows with duration [1]; this supports the view [1].
• Government loses tax and pays benefits, so taxpayers share the cost [1].
• Firms face weaker demand and lose trained staff [1]; the economy loses output, and inequality and regional decline widen [1].
• Families and communities suffer, for example through crime and strain on services [1].
• Evaluation: the effect depends on duration, the safety net and whether unemployment is cyclical or structural [1]; short frictional unemployment may improve matching [1]; a judgement on “mainly”, supported by evidence [1]. Examiner insight: Group consequences by who bears them and then weigh them. A list of effects with no comparison reads as description.

12. (a) 1.05 ÷ 1.015 − 1 [1] = 3.4% [1] (b)

• Benefits: higher output and incomes [1], higher tax receipts and lower benefit spending [1], lower poverty and better wellbeing [1].
• Costs: labour shortages and wage-push inflation, shown by unit labour costs rising 3.4% [1]; inflation can accelerate below NAIRU [1]; higher imports worsen the trade balance [1].
• Evaluation: depends on productivity growth and spare capacity [1]; supply-side improvements lower NAIRU and make full employment safer, so I conclude on net benefit with a reason [1]. Examiner insight: Use the calculated 3.4% in the evaluation. Linking part (a) to part (b) shows application, which generic answers lack.

Where marks are usually lost

• Using the wrong denominator for unemployment, employment and inactivity rates.
• Counting students, carers and retired people as unemployed.
• Writing that full employment means no unemployment.
• Including cyclical unemployment in the natural rate.
• Explaining LFS and claimant count separately with no comparison.
• Quoting results of a calculation without saying what they mean.
• Mixing up percentage points and per cent.
• Listing causes or consequences with no judgement on size, duration or who is affected.

Next steps

• Re-read the revision notes and study guide.
• Browse the OCR A Level Economics hub and tick off the printable checklist.
• Take the all free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OCR, A Level in Economics (H460) specification, Version 3.0 (June 2026), first assessment 2021.