The Causes of Unemployment

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    The Causes of Unemployment

    • The causes of unemployment can be examined from the demand side and the supply side.
    • Cyclical unemployment is unemployment arising from a lack of aggregate demand
      • This can be represented on a diagram by YFe (output when full employment) being the inelastic upwards slope of the AS curve. Unemployment will be the amount between this full-employed level and where AD currently meets AS.
    • Structural unemployment is unemployment caused by the decline of certain industries and occupations due to changes in demand and supply.
      • g. employers may not want to hire certain people because they lack the right skills
      • Or there are job vacancies in one part of the country, but the unemployed are in another
        • The aforementioned are also occupation and geographical immobility of labour.
      • Technological unemployment arises when workers lose their jobs due to advances in technology
      • International unemployment is when a firm decides to outsource its labour, or households decide to buy imported goods instead of domestic goods.
      • Frictional unemployment is short term unemployment occurring when workers are in-between jobs.
        • This is always likely to exist in an economy

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