Unemployment in Greece

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Macroeconomic IA Unemployment rate in Greece has risen the new record of 28 % after the 2008 recession that happens when there are two consecutive quarters of negative GDP growth. Unemployment is defined as labours in the working ages who do not have a work but actively seeking employment. The main cause of unemployment in Greece is the cyclical unemployment due to the fall of aggregate demand resulted from the contractionary demand-side policy carried out by the Greece government. Greece also faces several consequences of unemployment, which are known as the cost of unemployment. One of the major causes of unemployment in Greece is cyclical unemployment which is also known as demand-deficient unemployment. Cyclical unemployment is directly connected with the cyclical downturn in the Greek economy. Since the Greek economy is in recession (having negative GDP growth), aggregate demand tends to fall as the goods and services being purchased by the consumers eventually decrease. According to the graph, the economy was currently performing at the price level P1 and the real output at AD1. As negative GDP growth occurs aggregate demand falls from AD1 to AD2, with a corresponding fall of output level from Y1 to Y2. The same theory can also be applied to the demand of labour. Base on the diagram drawn, The number of workers was at equilibrium at the level of ADL and the average price level at We .As a fall in aggregate demand has taken place, in order for the firms to reduce their output and costs, the firms will reduce their labour demand from ADL to ADL1. Therefore, the number of workers will decrease from Qe to Q1 meaning labour forces between the gap of Qe and Q1 will be unemployed. The reason why low unemployment is one of the main objectives of government’s macroeconomic goal is because unemployment leads to a great cost to the economy. The costs of
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