Question

QUESTION THREE [25]

3.1 Fully discuss the type of unemployment that is linked to the business cycle of an economy. (10)

3.2 Explain how monetary policy can be implemented to meet the key macroeconomic objective of stable prices.

Answer 1

Type of unemployment that is linked to business cycle of an economy.

Unemployment is often used as a measure of the health of the economy. unemployment occurs when a person who is actively searching for employment is unable to find work.the most frequent Major of unemployment is the unemployment rate which is the number of unemployed people divided by the number of people in the labour force. The various type of unemployment are as under.

A. Seasonal unemployment:- it is an unemployment it that occurs during certain season of the year. Agricultural labourers in country rarely have worked throughout the year.

B. Disguised unemployment:-
it is a phenomenon where more people are employed than actually needed.it is primarily traced in the agricultural and the unorganised sector of workers in developing countries.

C. Cyclical unemployment:-
it is result of the business cycle where unemployment rises during recession and declines with economic growth. Cyclical unemployment figures in developing countries are negligible it is a phenomenon that is mostly founded in capitalist economy.

D. Structural unemployment:- it is a category of unemployment arising from the the mismatch between the jobs available in the market and the skills of the available workers in the market. Many people in countries do not get job due to lack of requisite skills and due to poor education level, it becomes difficult to train them.

E. Frictional unemployment:-

Frictional unemployment are also known as search unemployment,it refers to the time lag between the job when an individual is searching for a new job are is switching between the jobs.an employee requires time for searching a new job for shifting from the existing to a new job this invertible time delay causes the frictional unemployment.it is often considered as a voluntary unemployment because it is not caused due to the shortage of job but in fact the workers themselves quit their jobs in search of better opportunities.

F. Technological unemployment:- it is loss of jobs due to change in technology. In 2016 World Bank data predicted that the proportion of job threatened by automation in in country is 69% year on year.