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Unemployment (Policies to reduce unemployment (Structural (SS side…
Unemployment
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Natural unemployment
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Structural
Caused by mismatch of skills and jobs due to change in structure of economy (unemployed lacking correct skills)
Causes
Change in pattern of demand = some industries facing declining demand, can cause cyclical unemployment
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Cyclical Unemployment
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due to demand deficient unemployment (aka when there is a recession and employers are forced to lay off workers
Real wage unemployment
when real wages are forced above the market clearing level (aka now the wage to pay workers is too expensive so you have to cut some people to save costs)
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Impact of Unemployment
Economic impact
Loss of output of goods and services = bc unemployed so wasting scarce resources = producing within PPC = welfare loss due to output forgone
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Loss of productive capacity = with long term unemployment = workers erosion of skills = quality of workforce worsens w decreased productivity = decline in productive capacity
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Seasonal unemployment
due to seasonal fluctuations in economic activity (main causes: annual weather cycle, traditions and customs)