Describe the main changes in unemployment between 1989 and 1999 as shown in Table 2.

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Robert Catherall 12PE                Mr Dorran

Economics                October 2002

AS Question on Unemployment

(a) Describe the main changes in unemployment between 1989 and 1999 as shown in Table 2. (5 marks)

The percentage of unemployment in the labour force decreases by 0.4% from 1989 to 1990 but the following year sharply increases by 2.2%.  Unemployment carries on to increase for a further two years until it reaches an all time high in the decade of 10.3% in 1993.  Unemployment decreases from 1993 to 1999 with a total decrease of 6% to 4.3% with a sharp decrease between 1996 and 1995 of 1.8%.

Overall we can see that throughout the decade unemployment sharply rose over three years and then steadily fell for six years resulting in a lower unemployment percentage in 1999 than in 1989 and any other year in the period.

(b)(i) Explain why unemployment is likely to vary with fluctuations in aggregate demand. (4 marks)

Fluctuations in aggregate demand will cause unemployment. Unemployment that occurs due to fluctuations in aggregate demand is called cyclical unemployment. Cyclical unemployment will occur when aggregate demand (D2) reduces as supply (S2) will therefore reduce due to the reduction in aggregate demand and therefore entrepreneurs will look to cut costs and to do this will make their workforce smaller.  However if aggregate demand increase (D3) there will be an increase in supply (S3) and therefore entrepreneurs will look to maximise profits and will employ more workers to be able to obtain this new level of supply.  Therefore if aggregate demand fluctuates then employment levels will follow the level of aggregate demand.  If aggregate demand is high unemployment will be low and if aggregate demand is low then unemployment will be high.

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(b)(ii) Explain three other possible causes of unemployment. (6 marks)

Another possible cause of unemployment is residual unemployment.  Residual unemployment is people who are sick or disabled who cannot get a job because entrepreneurs are not willing to employ them due to their condition.  Therefore if there is a large percentage of ill or disabled people in the UK there could be a large residual unemployment, however this could be reduced if there are technological advancements that will help the ill or disabled to be able ...

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