Unemployment in Macroeconomics

1804 Words8 Pages
Macroeconomics Coursework assignment word count: 1802 Marco Lau What are the main means by which unemployment can be controlled? Unemployment, the state of being unemployed, especially involuntarily can cause big problems in our modern world. But how does one measure such an enormous prospect? When measuring unemployment it is first necessary to measure the working population, as not every person is able to work. Looking at the elderly and young children as labour resources would be a waste of time. Therefore the first step to controlling unemployment would be to first measure the size of the scale we are working with. We must also look at current unemployment problems, more specifically the costs…show more content…
• Cyclical unemployment – This is demand deficient unemployment when there is a general deficiency of aggregate demand in the economy. E.g. when there is a recession we see rising unemployment because of plant closures and worker lay-offs. • Voluntary/involuntary unemployment – The difference between voluntary and involuntary unemployment is that with voluntary unemployment it is that the worker chooses not to accept a job at the going wage rate as opposed to involuntary unemployment when a worker accepts the wage but cannot get the offer of a job. Now that we understand the types of unemployment and the issue regarding the scale of unemployment we can focus on some of the consequences of unemployment. Many economists regard persistent unemployment as a sign of market failure, this is because unemployment is regarded as a waste of resource in the labour force; this can mean a loss of output and shows a reduction in economic efficiency. We measure unemployment using the output gap: unemployment – claimant count. This is used to measure lost output, if a high amount of output is lost it means the economy is operating below full capacity. How else can unemployment affect the economy? Apart from lost output there are several ways that unemployment affects the economy; a high rate of long term unemployment can result in a negative effect on a country's economic growth potential. This can also affect government finances due to
Get Access