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UNEMPLOYMENT

KEY TERMS

NATURAL RATE OF UNEMPLOYMENT: The unemployment that exists when AD for labour equals AS,
voluntary/frictional unemployment
FRICTIONAL UNEMPLOYMENT: Workers moving between jobs
STRUCTURAL UNEMPLOYMENT: Unemployment due to a change in the pattern of demand and production
EQUILLIBREUM UNEMPLOYMENT: When AD for labour equals AS of labour
GEOGRAPHICAL…

Page 2

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Some workers may decide to take a break `between jobs' ­ frictional unemployment.
As new products are developed and consumer tastes change, firms labour requirements in terms of skill etc.
change leading to structural unemployment.
THESE EQUAL EQUILIBREUM UNEMPLOYMENT ­ WHERE AD for labour = AS for labour.

CAUSES AND…

Page 3

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Fiscal policy ­ to reflate economy by increasing own expenditure or deucing income tax rates.
Monetary policy ­ make credit more readily available.
Regional policy ­ to stimulate economic activity in those areas where it is above average ­ offer employment
subsidies or tax reductions to firms relocating in such…

Page 4

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Any attempt to reduce unemployment below the NRU by stimulating AD is futile and governments will need to
tackle the supply side causes if they wish to reduce unemployment.

NAIRU

Nonaccelerating inflation rate of unemployment ­ rate of unemployment when rate of wage inflation is stable. Difficult to
observe and…

Comments

davidsalter

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This is a 4 page summary of what is needed for A2. It gives all the key terms. It can be read and studies itself or is a useful template for the kind of revision notes that students may find useful to create themselves.

Puneet Kaur

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This is a great resource, wondering whether you have any more for the rest of Unit 4 A2 topics? I'd be grateful if you do! Thanks!X

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