Question

Identify challenges linked with unemployment and solutions available.

Answer 1

There are different challenges associated with the unemployment. The first challenges is the decrease in aggregate demand in the economy as people will have less income to spend. It will further reduce the supply and unemployment will further increase. The second challenge is the economy going into deflation, making the lending a less attractive proposition for the institutions. It will discourage the economic growth. The third challenge is the increase in crime rates as unemployed people are more prone to go in illegal activities and become the part of undercover economy. The fourth challenge is increased level of unemployment benefits to the unemployed people and it creates additional burden on the government. As a result, more debt is taken to create a burden for the coming generation.

There are solutions to resolve the challenges of unemployment. The first solution is to make government spending on productive activities that will create employment opportunities and unemployment and related issues will be mitigated. The second solution is to give an economic stimulus to firms to produce & create more employment opportunities. It will reduce unemployment. The third solution is to make a policy of transfer payments that stabilizes the economy and give a balance to the aggregate demand in the economy. It will improve the employment situation in the economy.