Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What type of unemployment occurs as individuals search for jobs?

1. Real wage unemployment

2. Frictional unemployment

3. Demand-pull unemployment

4. Seasonal unemployment

The correct answer is: Frictional unemployment

Frictional unemployment refers to the temporary period when individuals are between jobs or are in the process of transitioning into a new job. This kind of unemployment is a natural part of a healthy economy and occurs because people may voluntarily leave their jobs to seek better opportunities, relocate, or enter the workforce for the first time. Individuals searching for jobs during this period are often in varying stages of employment and may have specific skills that match certain roles, highlighting that this is a normal phase of the employment cycle rather than a sign of economic distress. In contrast, real wage unemployment occurs when there's a discrepancy between the wages that employers are willing to pay and the wage demands of workers, leading to a surplus of labor. Demand-pull unemployment is not relevant here as it describes unemployment resulting from insufficient demand for goods and services in the economy, which leads to layoffs. Lastly, seasonal unemployment pertains to job loss due to seasonal variations in demand, such as agriculture or tourism, which does not apply to individuals actively searching for new employment independent of specific seasons.