Causes & consequences of unemployment

  • Created by: Jess
  • Created on: 18-04-14 15:54

Causes of unemployment:

  • Cyclical unemployment: unemployment arising from a lack of AD (demand side unemployment)
  • Structural unemployment: unemployment caused by the decline of certain industries and occupations due to changes in demand and supply

Forms of structural unemployment may be: regional unemployment; technological unemployment (advances in technology making people unemployed) or international unemployment (outsourcing)

  • Frictional unemployment: short term unemployment occuring when workers are in-between jobs

Consequences of unemployment: 

  • Lost output: having people willing and able to work in unemployment is a waste of resouces. (economy producing inside its PPC)
  • Lost tax revenue: if people were in work, incomes, spending, and possibly profits would be…


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