Question

Principles of Macroeconomic

1. Discuss your thoughts on the quote: "Unemployment is bad for the unemployed individual and bad for the nation. Hence the government ought to eliminate all unemployment."
2. Explain the role of costs involved with unemployment.
3. Discuss your stance on the role of government in addressing unemployment.
4. Differentiate among the three types of unemployment and their respective causes.

Answer 1

Unemployment is bad both from micro and macros point of view. In microeconomics perspective it causes wages to fall because of lack of demand. On macroeconomic perspective it reduces aggregate demand of goods and its consumption and also average households income. Thus real GDP and GDP per capita falls.

Hence government's incurr costs to revive such situations using policies like Universal basic income, boost to startups, decrease in corporate tax, unemployment insurance.

3 types of unemployment as follows:

1. Cyclical unemployment - unemployment due to economic cycles
2. Frictional unemployment - unemployment due to attrition rate in market and is natural
3. Structural unemployment - occurs due to absence of demand and organisation structural changes