Voluntary unemployment is defined as a situation where the unemployed choose not to accept a job at the going wage rate. Reasons for voluntary unemployment Generous unemployment benefits, which make accepting a job less attractive. High marginal tax rates, which reduce effective take home pay. Unemployed hoping to find a job more suited to skills/qualifications. …
A look at the extent to which policy makers face a trade off between unemployment and inflation. The Phillips curve suggests there is a trade off between inflation and unemployment, at least in the short term. Other economists are more sceptical.
To what extent can supply side policies reduce unemployment? To try and reduce unemployment, the government can provide interventionist supply-side policies, such as better training and education or it can try free-market policies, such as increasing labour market flexibility. However, there is a limit because supply-side policies are ineffective in dealing with cyclical (demand-deficient unemployment) …
Definition: Real wage unemployment occurs when wages are set above the equilibrium level causing the supply of labour to be greater than demand. Classical unemployment of Q1-Q2 caused by a wage NMW above the equilibrium. Classical economists argue the solution is to cut wages to reduce unemployment. For example, a fall in demand for labour …
Readers Question: Why is it that when there is low economic growth, unemployment rises? A low rate of economic growth can cause higher unemployment. Though it is not always the case. During 2010-13 the UK experienced a slow rate of economic growth, but unexpectedly unemployment fell. If there is negative economic growth (recession) we would …
Demand side policies include expansionary fiscal and monetary policies. For example, the govt could increase Govt spending and lower taxes. G is a component of AD, therefore, this will cause AD to increase, there may also be a multiplier effect causing AD to increase even more than the initial effect Lower tax rates will increase …
Unemployment in many European countries has risen sharply due to the credit crunch and global recession. The worst hit countries include Spain (ES) and Greece (EL), who both have unemployment rates of over 24%. In the past few months, there has been a slight reduction in European unemployment, but the prolonged period of mass unemployment …
Readers Question is recession causes unemployment or unemployment causes recession? Essentially, it is a recession which causes unemployment. As output and demand fall, firms cut back on hiring new labour. This leads to a rise in unemployment as there are fewer job vacancies. Graph showing rise in unemployment after 2008 recession Also, some firms may …