Economics Types of Unemployment

Activity 1:

Read the article at the following link: http://www.economist.com/blogs/freeexchange/2012/02/hysteresis

1. Illustrate the challenge of cyclical unemployment using a PPC, The business cycle and the AD/AS model.

2. What challenges do you think a macro economy may face when persistent cyclical unemployment occurs?

- cyclical unemployment results from a fall in demand for labor due to recessions

- constantly loosing demand for services and goods

- unemployment continues to increase

- GDP would decrease

- Disinflation

3. Considering Shumpeter's theory, how can cyclical unemployment benefit a macro economy in the long run?

- Advancement of technology

- People will acquire a greater skill set

- Regenerate the economy, creative destruction would occur constantly improving infrastructure, services and goods

- Unfortunately some people do nothing. Go from cyclically unemployed to structurally unemployed

Activity 2:

Considering each of the forms of unemployment outlined on pages 166 - 167 in your exercise book, suggest 2 government policies that could alleviate each one

- Frictional

o Offering benefits and incentives to stay with their current job

o Assessing minimum wages and worker benefits from the government

o Connect

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