Causes, Effects And Solutions Of Unemployment

Question 1

What is the unemployment policies process?

Answer 1

• Identify and illustrate the type of unemployment

• Identify appropriate policies to address the unemployment

• Illustrate and explain anticipated impact

• Outline alternative outcomes

Question 2

How do you identify the type of unemployment?

Answer 2

Labour:
• Equilibrium
- Natural Unemployment
• Disequilibrium
- Real Wage Unemployment

Goods:
• Disequilibrium
- Demand deficient/Cyclical Unemployment

Question 3

What are the solutions for demand deficient unemployment?

Answer 3

Fiscal Policy:
• Increase Government Spending
• Reduce Taxes

Monetary Policy:
• Reduce Investment
• Increase Imports

Question 4

What are the solutions for REAL WAGE UNEMPLOYMENT and the issues with these?

Answer 4

• Reduce trade union power
• Reduce MWR
• Reduce welfare benefits

Issues:
• Trade union resistance
• Worsening distribution of income

Question 5

What are the solutions for SEASONAL AND FRICTIONAL UNEMPLOYMENT?

Answer 5

• Reduce unemployment and welfare benefits (Outwards shift SRAS)

• Provide support to improve the effectiveness and urgency of job searches (Inwards shift SRAS)

Question 6

What are the solutions for STRUCTURAL UNEMPLOYMENT and it’s issues?

Answer 6

• Educate citizens to be more occupationally flexible

• Retraining programmes

• Subsidise training

• Subsidise relocation

• Apprenticeship schemes

Issues:
• Opportunity Cost

• Limited SR Impact

Question 7

What are the solutions for DEMAND DEFICIENT + STRUCTURAL unemployment?

Answer 7

• Fiscal

• Monetary

• Supply Side