economics

unit 1 and 2

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Employment in the UK essay question
(a) Describe the main changes in unemployment between 1989 and 2000 as shown in
extract B:
In 1989 we can see that unemployment was quite high at 5.9%, it began to rise and reached
a peak in 1993 at 9.7 million. There was a recession in the early 1990's which reflects the
high rate of unemployment. We can then see that the percentage of unemployed began to
slowly decrease down to a low 3.6% in 2000.
Overall we can see that unemployment rose quite fast between 1989 and 1993 until it
reached its peak and slowly decreased down to 3.6% over a period of 11 years.
(b) Using examples from the extracts, explain 3 possible causes of unemployment:
From extract C the first possible cause of unemployment,
The first is fluctuation in aggregate demand. The source tells us that we need a stable and
growing economy for unemployment levels to rise. Consumption is a large factor of
aggregate demand and this relies on the people's income. So if people are unemployed, they
will not have as much money to go out and buy products. This will bring the aggregate
demand curve downwards and to the left. (See diagram 1) If the aggregate demand curve
falls, GDP will fall significantly. This is also the same with investment, if income is low
people are less likely to invest. However, if the aggregate demand curve fluctuates to the
right quite quickly, it can lead to inflation. There will be fewer jobs available because people
are spending less, which in the long run, can cause unemployment.
Another possible cause of unemployment is having a large majority of the population, being
unskilled workers. In extract D, it tells us that a problem with Britain's most deprived areas
is not necessarily the lack of jobs, but people not being skilled enough to take advantage of
nearby labour markets. This is caused by a lack of education and qualifications, if people
don't have these, then they usually are unable to get the job. A way the government could
over come this problem and get more people employed is by offering them training courses.
Lack of education is a very common cause of unemployment.
Another possible cause of unemployment is structural changes in the economy. We can see
in extract C that reductions in unemployment, require a cut in structural unemployment,
which requires the use of supply side policies to make the labour market work effectively.
These measures can be used to increase economic incentives and the quality of the labour
services offered to the unemployed. By giving them incentives, they will want to get into
work.

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Evaluate the polices the government should adopt if it wishes to achieve a low level
of unemployment.
The unemployment described in the sources, is cyclical unemployment. This means that
there is insufficient demand in the economy for all the workers who wish to work at
current wage rates to obtain a job. This could happen in a down turn or a recession (see
diagram 2). There are several policies the government could enforce to tackle the
problem of unemployment.…read more

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Another possible policy to enforce is a supplyside policy. They aim to increase AS by
raising market efficiency and in turn increase AS. The government could improve education
and training, which should raise the productivity of labour. If people are more skilled, they
will be available for new jobs in different sectors. In doing this, it should hopefully shift the
long run aggregate supply to the right.…read more

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