Causes of inflation (D/B p230-232)
The cure will depend on the cause:
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Governments throughout the world are faced with the problem of unemployment. Consider the following newspaper headlines: · Unemployment benefits cut · Government introduces new training schemes for the long-term unemployed · Incentives for young people to stay at school · Minimum wage to be abolished · Government to reduce taxes/charges on business · Government to introduce work-for-the-dole scheme (i.e. recipients of unemployment benefits would have to do some type of work in the community to receive their benefits) · Government announces massive public works program (e.g. provision of employment by the creation of predominantly public goods at a prescribed wage) · Job subsidies to be paid to businesses who provide 12 months work for the long-term unemployed · Government to lower interest rates For each headline: a) Explain how the strategy may affect unemployment, including what type of unemployment will be influenced. b) Examine the effect of each strategy on the level of government spending (in some cases there will be no effect). Conclusions: What specific measures can be used to target the five types of unemployment? How could these policies conflict with the governments other macroeconomic goals? IB Essay practice a) Explain the various costs of unemployment. b) Evaluate the various policies aimed at reducing unemployment. Types and causes of unemployment
Work to complete: Frictional and seasonal unemployment are fairly short term forms of unemployment. Distinguish between the two and explain the causes of each. Structural unemployment is of greater concern than frictional and seasonal unemployment
The sum of frictional, seasonal and structural unemployment is the “natural rate of unemployment”, i.e. the inevitable level of unemployment which exists at YFE (the full employment level of output or potential output)… there will always be labour market imperfections, e.g. lack of information (imperfect knowledge) or labour market rigidities. Any unemployment which exists beyond this natural rate of unemployment has been caused by the business cycle, e.g. the economy is experiencing a recessionary gap (not at long-run equilibrium) a. Describe cyclical unemployment. b. Use diagrams to explain what causes cyclical unemployment. |
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March 2021
Maree SpraggonTeacher of IB Economics at the American School of Budapest Categories |