• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Evaluate the polices the government should adopt if it wishes to achieve a low level of unemployment.

Extracts from this document...

Introduction

Employment in the UK essay question (a) Describe the main changes in unemployment between 1989 and 2000 as shown in extract B: In 1989 we can see that unemployment was quite high at 5.9%, it began to rise and reached a peak in 1993 at 9.7 million. There was a recession in the early 1990's which reflects the high rate of unemployment. We can then see that the percentage of unemployed began to slowly decrease down to a low 3.6% in 2000. Overall we can see that unemployment rose quite fast between 1989 and 1993 until it reached its peak and slowly decreased down to 3.6% over a period of 11 years. (b) Using examples from the extracts, explain 3 possible causes of unemployment: From extract C the first possible cause of unemployment, The first is fluctuation in aggregate demand. The source tells us that we need a stable and growing economy for unemployment levels to rise. Consumption is a large factor of aggregate demand and this relies on the people's income. So if people are unemployed, they will not have as much money to go out and buy products. This will bring the aggregate demand curve downwards and to the left. ...read more.

Middle

This could happen in a down turn or a recession (see diagram 2). There are several policies the government could enforce to tackle the problem of unemployment. Firstly, they could cut interest rates in order to boost the AD; this would be using the monetary policy. In cutting interest rates, it would boost consumption and investments and in theory should move the AD curve outwards and to the right. Thereby, hopefully increasing the availability of jobs. The government aims to set interest rates with the objective of keeping inflation close to the target of 2%. The monetary policy can be enforced relatively quickly; however, it can take time for policies to influence aggregate demand. It is estimated to take 18 months before a change in interest rates will affect consumption and investment. So this policy seems to be more of a quick short term effect rather than a sustainable one. Another possible policy is to use the fiscal policy and increase government spending. The government usually spends money on education, health, defence and social security. The government can raise the AD by increasing spending. ...read more.

Conclusion

If people are more skilled, they will be available for new jobs in different sectors. In doing this, it should hopefully shift the long run aggregate supply to the right. (See diagram 3) A reduction in unemployment benefits, would give people an incentive to seek more work and accept lower wage rates, thereby reducing unemployment levels, however some argue that cutting benefits would reduce AD and output. Supply side policies are selective and are targeted at particular markets to raise economic efficiency. Many agree that if these policies achieve their goal, it will make it easier for the government to then achieve its aims of reducing unemployment. Increasing AS allows AD to rise over time without the risk of inflation. However, there is the problem of not knowing how workers would respond to cuts in wages or benefits. Also some of these policies would take a long time to have an effect on the economy. From my point of view, I believe that the most effective policy to enforce would be to cut interest rates and taxes. It would give people more incentive to spend in shops and on investments. This would then create more jobs, which would then reduce the level of unemployment. I feel it would be most effective and efficient. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Bangladesh. Most government aim for full employment and stable prices. Which of those two ...

    This also attracted more labor to acquire cultivation skills to start rice production. However over the years Bangladesh is again faced with unemployment problems because there is now a large population of landless formers. Although Bangladesh is a less developed country, private investors managed to create successful industries of textiles and pharmaceuticals both of which provided new employment opportunities.

  2. What are the government objectives? Explain why each is important and how the government ...

    Retraining can also to help to reduce unemployment by giving people who are part of the way through there working lives different or improved skills and knowledge which are likely to be in demand in the future e.g. computer skills.

  1. Budget 2004-05 and Economic Analysis of Pakistan

    Pakistan has over 19.3 million Housing units in the country. About 24.8 million Housing units for a population of 148.7 million people are required. Hence, a shortfall of 5.5 million homes is estimated as of end June 2004. A number of measures have been taken by the Government for reviving

  2. How have the Rates of Inflation in the UK Changed Since the Monetary Policy ...

    After that it follows what the theory would suggest. What was happening at the beginning of 1999 and the information that has been shown in graph 1 and graph 3 definitely suggest that it is not just the MPC that is affecting the inflation levels and helping to have kept the price stability from 1993.

  1. Comparing the effects of immigration on GDP in Malaysia, Japan and South Africa.

    These have raised the urgency of Japan to reduce labor shortages. In response, the government has begun to consider relaxing restrictions on employment of certain categories of workers for which there are serious labor shortages. Therefore, this causes the increase in the immigrants to Japan.

  2. Identify the causes of unemployment and suggest suitable remedies

    When would it all end? Frictional unemployment is voluntary unemployment for workers who are looking for a better job. Previously, the monthly figures for this had been be as high as 300,000. The bigger the imperfections in the labour market, the longer will be this period of unemployment for each worker, and the higher the 'search' costs for the individual.

  1. Demonstrate how an appropriate use of fiscal policy can achieve a target level of ...

    The ways these work is that if national income rises then so too do tax revenues, this in turn means that government expenditure will decrease, which therefore means an increase in the level of national income. The national level of income will vary depending on the amount taxes change with income.

  2. Australia's place in the global economy - "Explain the reasons for our current exchange ...

    (Source: Growth party may be ending - Chris Richardson BRW 12/1/01). With oil prices high, consumer confidence was diminishing. The interest rates in Asia were kept low, whereby Australia was forced to also keep interest rates low, due to Asia being one of Australia's major trading partners.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work