Question

Macroeconomic

The Business Cycle (Study Plan 12.1) 1. Debate on Causes of Unemployment Two economists are debating the cause of a high unemployment rate. One economist argues that there is not enough government spending. The other says high unemployment is a structural problem-people who can't move to take new jobs because they are tied down to burdensome mortgages or firms that can't find workers with the skills they need to fill job openings. a. Which business cycle theory would say that the first economist is correct and why b. Which business cycle theory would say that the second economist is correct and why?

Answer 1

Unemployment is a situation in which an individual is looking for a job but unable to find one.

A)

John maynard Keynes have explained that unemployment occurs when there is not enough demand in the economy. Due to the cyclical nature of the market there are boom and bust cycles in the economy.

Therefore, Keynesian theory of unemployment recommends government driven aggregate demand to reduce unemployment.

Government intervention was demonstrated during The great depression and the 2008 financial crisis.

B) The second economist is right because he is explaining the Theory of structural unemployment.

It states that unemployment arises because of the mismatch between the skills of the unemployed individual and the skills requirement of the specific job or because of technology advances due to which machine replaced humans.