Question

Choose any 2 out of the 4 types of unemployment. a) Define and discuss that type of unemployment. (2 each x 2 = 4 marks) b) Provide an example. (1 each x 2 = 2 marks) c) What solutions can governments try to address that type of unemployment. (2 each x 2 = 4 marks)

Answer 1

1) Structural Unemployment Refers to the unemployment arises due to structural change in a dynamic economy. Structural Unemployment caused by a massive mismatch of skills or geographic location is noted as structural unemployment.

Example: Heavy Manufacture - Heavy Manufacture (mining) now involves machines so humans are no longer needed for the harder work. this unemployment poses more of a problem because workers must seek jobs elsewhere or must have to develop the skills required / on-demand. The process is full of pain and frustration and may lead to negative impacts on society as well.

Solutions to remove structural Unemployment: it is supply-side Unemployment so the government has to make policies related to Education and training, reduce power of trade unions, etc.

2) Cyclical Unemployment refers to unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be less because the total economic output is being maximized. When economic output decreases, as measured by the GDP, the business cycle is low and cyclical unemployment will increase.

Example: The Great Depression

Solutions to remove Cyclical Unemployment: to remove the Cyclical unemployment government use monetary policy to increase the Aggregate demand and lower the interest rate, cutting down the interest rates means that the cost of borrowing is lower. When it is easier to borrow money, people spend more money and invest more. This raises aggregate demand and GDP and falls cyclical unemployment