1 Week Economics Essay

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1a) Discuss the different types of unemployment Frictional Unemployment This is unemployment is due to the natural frictions that occur within an economy. This is caused by changing conditions and is represented by qualified individuals with transferable skills who change jobs. An example of this is an individual who has just came out of a temporary contract with a construction firm and is now searching for another job. Structural Unemployment This is due to structural changes within the economy which eliminate jobs leaving individuals unemployed. For example, In September 2008 the world suffered a severe financial crisis which impacted Woolworths Group plc. causing them to go into administration in January 2009. Their downfall resulted in 27,000 jobs lost. Cyclical Unemployment This is due to a downturn in the business cycle. For example if you look at the diagram you can see that there are four stages to a business cycle. When the economy hits the recession stage, firms decrease their production making part of their work force irrelevant. This is what causes firms to fire employees. 1b) The Office for National Statistics recently announced that the unemployment rate was reduced to 7.8% from 7.9%. In your opinion, which type of unemployment is responsible for this reduction? Explain your answer I believe frictional unemployment is responsible for the reduction because the labour force is what makes up the employment rate and individuals are considered part of the labour force when actively looking for a job. As frictionally unemployed individuals find jobs, the employment rate decreases. My theory is that the FED used policies effective and efficiently enabling businesses to lend at a reasonable rate whilst creating more jobs, thus decreasing employment rate. There are also conspiracies around the rate drop which are arguable. Ron Lazof, Blogger for

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