Slides in this set
· High Eurozone Unemployment
It has consistently been above that of the UK's
and USA's partly due to economic cycles.
This is mainly structural unemployment.
· Long-term unemployment
· Concentrated on a small number of workers.
· Cause income inequality due to a lack of
paid work opportunities.
· Has little influence in moderating pay
settlements and wage inflation.…read more
Economic costs of unemployment include:
· Loss of output
Unemployment wastes scarce economic resource not
longer allocatively efficient.
· Social costs
Social deprivation leads to external costs. E.g. Connections
with crime, divorce rates, life expectancy.
· Inequalities in income & wealth
Some areas may see a fall in real incomes.
· Damages long run growth
Especially prominent if a country has a persistently high
unemployment rate.…read more
Reasons for high unemployment:
· Trade Unions
Many employees have their wages set by collective
bargaining; leading to inflexible real wages.
· Employment Laws
Makes it harder to hire and fire labour acts as a barrier to
· Generous Unemployment Benefits
· Might cause increased frictional unemployment this
reduces the incentive for the unemployed to look for and
accept paid work.…read more
Inflation and Interest Rates
· The European targets for the inflation rate is
at 2% and this is done through interest
rates. The inflation rate has been kept near
· However there has been slow growth in the
economy and as inflation has limited the
· The ECB is not able to freely change
interest rates to stimulate AD.…read more