· Describe, using examples, the meaning of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.
· Distinguish between the causes of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.
· Explain, using a diagram, that cyclical unemployment is caused by a fall in aggregate demand.
· Explain, using a diagram, that structural unemployment is caused by changes in the demand for particular labour skills, changes in the geographical location of industries, and labour market rigidities.
1. Frictional and seasonal unemployment are fairly short term forms of unemployment. Distinguish between the two and explain the causes of each.
2. Structural unemployment is of greater concern than frictional and seasonal unemployment.
a. Describe structural unemployment.
b. Explain how structural unemployment may be caused by:
i. changes in the demand for particular labour skills, (use a diagram in your explanation)… what could cause this change in demand?
ii. changes in the geographical location of industries,
iii. and labour market rigidities (factors preventing the forces of demand and supply from operating in labour markets)… explain how minimum wage legislation, strong trade unions and employment protection laws may prevent the market from clearing… incorporate a labour market diagram in your answer
3. 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.