types of unemployment

Question 1

Cyclical unemployment

Answer 1

This is caused by a lack of aggregate demand, with insufficient demand to generate full employment. (if it’s persistent is is called demand-deficient.

Question 2

Structural unemployment

Answer 2

Structural unemployment occurs when certain industries decline because of long term changes in market conditions. For example, over the last 20 years UK motor vehicle production has declined while car production in the Far East has increased, creating structurally unemployed car workers.

Question 3

Frictional (search) unemployment

Answer 3

When workers lose their current job and are in the process of finding another one.

Question 4

Voluntary unemployment

Answer 4

when workers choose not to work at the current equilibrium wage rate