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Macroeconomics 1 – The domestic economy

9.3 Unemployment

Type Comments/policies

Cyclical  Keynesian economists would argue
that need to boost AD.
 Due to insufficient AD (“demand
deficient”)  Monetarists would argue you need
to boost AS.

Frictional
 Not necessarily a problem
 People moving from one job to
another  Reduce by better information.

Structural/technological
 Supply side policies – retraining,
 Due to structural changes in relocation grants, etc.
industries (e.g. steel production)

Seasonal  e.g. demand for fruit pickers

 Due to seasonal nature of industries  can create regional economic
problems

Real wage  Market imperfection (e.g. strong
unions)
 Wages are (artificially) too high
 reduce union powers and abolish
minimum wage agreements

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