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Macroeconomics Chap 9 :
UNEMPLOYMENT (TYPES OF UNEMPLOYMENT (CYCLICAL…
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UNEMPLOYMENT : refers to the number of people of legal working age who are willing and able to work but are unable to find suitable employment
note!!
★ Voluntary unemployment is not counted in overall unemployment rate
★ Underemployment : when the employed are working below their productive capacity
★ Full employment : the level of employment sufficient to produce the economy's potential output (does NOT mean there is zero unemployment)
★ Natural unemployment will ALWAYS exist in the economy (frictional + structural) (in SG : about 2-3%)
★ Tends to be more severe in the LONG RUN
Unemployment rate = number unemployed / number employed + number unemployed x 100%
Labour force participation rate = labour force / working age population x 100%
Une leads to an inefficient allocation of resources and thus results in welfare loss due to allocative inefficiency
Policies designed to solve unemployment are mainly determined by the ROOT CAUSES for unemployment.
- DD deficient une will req AGGREGATE DD side solutions (which is then dependent on whether lack of AD is due to poor external dd or domestic dd)
- SS side problems then req AS side management policies