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

Reasons for unemployment and the main economic theories explaining it.

Extracts from this document...

Introduction

The unemployment is a common issue of macroeconomic policy. Unemployment is often debate on two difference views of economist has been considered known as Keynesian between Monetarist. Sunhee an ( Group M) The definition of unemployment described people who are able and willing to work at a prevailing wage but they are unable to find a job. To begin with, economists recognised the four key classes of unemployment discussed above - frictional, seasonal, cyclical and structural. In this essay, I will discuss how economists considered the main roots of unemployment as they are seeking different theories and will assess how two economist (Keynesian and Monetarists) approaches to the unemployment problem. Fundamentally, monetarist and Milton Friedman believed that the money supply is the most important component of economic growth and affects aggregate demand. Monetarist claims that there are various factors of unemployment. Firstly, monetarist believed that the unemployment arise due to excessive growth of the money supply leading to excess demand for goods and services. ...read more.

Middle

If reduce the rate of growth money supply it will gain low inflation, without leading to long-term unemployment. In addition, the government intervention and high tax can causes of disrupt to motivating investment and build business to private companies or individuals. < Minimum wage legislation > To simplify the diagram, A minimum wage of OF is bring to higher labour wage rates in this diagram. However, AB workers will lose their jobs because the equilibrium point more lower than their wage, also a total unemployment on AC will going to be increase. Keynes, Keynesian economist, they are inconsistent with classical beliefs that markets create full employment by invisible hand. We can assume that, if prices and wages do not adjust and if the classical model doesn't work then how can we reduce unemployment. Consequently, Keynesian proposed that increasing the economy's aggregate demand was the solution to this problem. In this view, the Keynesian principles were emphasized the intervention (i.g. ...read more.

Conclusion

<The Keynesian view on Unemployment> The effect of fiscal policy is determined by the amount of employment in the economy. In the figure of output below OB, expansionary fiscal policy can increase real out the higher demand leads to the increase in supply. Subsequently, the number of job is increase and creates employment. In conclusion, the main stand of the Keynesian - monetarist controversy centered on the determinants of aggregate demand. As I mention that, the monetarists were related primarily to argue that monetary factors which the growth of money supply and they treated as under the interest rates. In addition, monetarist contend that the unemployment might would be the result in Frictional unemployment temporary (it can be considered Voluntary unemployment ) and Technological unemployment. The Keynesian on the other hand were believes high autonomous expenditures (government expenditure or investment) and tax rate policy. In view, Keynesian strongly argued that fiscal policy is the main component of the aggregate demand. Furthermore, Cyclical unemployment and Structural unemployment both may bring the causes of unemployment in the Keynesian view. ...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

Here's what a star student thought of this essay

3 star(s)

Response to the question

This essay engages superbly with the question, exploring economic theories beyond the A-Level syllabus. The diagrams don't seem to have transferred, but through the following sentences explaining them I can only assume these are correct. The essay is able to ...

Read full review

Response to the question

This essay engages superbly with the question, exploring economic theories beyond the A-Level syllabus. The diagrams don't seem to have transferred, but through the following sentences explaining them I can only assume these are correct. The essay is able to look at the textbook types of unemployment: structural, frictional, cyclical and seasonal and then impose a critical voice using Keynesian and Monetarist theories. I was very impressed with this angle!

Level of analysis

The analysis in this essay is sound. The diagrammatical analysis is good, with there being clear reference to the shifts of curves to show a strong understanding. Sometimes the essay doesn't stay focused, where simply analysis is what was required. For example "Another concern is the factors of unemployment that Structural unemployment occurs when workers have insufficient skills demanded by employers from changes structural in an industry." has the right idea, but the syntax of the sentence makes it seem that they don't understand. There is potential when the essay says "Keynes argued" or "it is argued" as it shows multiple interpretations, yet the backbone analysis isn't always there. It is as simple as stating that a reduction in aggregate demand causes an increase in unemployment, but this essay seems to go about explaining this in a long way. I must stress the necessity in a logical and clear argument!

Quality of writing

The essay has a somewhat jumbled structure. The introduction is clear, but there are multiple conclusions. Sometimes a paragraph consist of one sentence, which shows a lack of understanding and the inability to expand on a point. A clear structure is set up in the paragraph, yet not followed. If I was doing this essay, I would have a paragraph for each cyclical, structural, frictional and seasonal unemployment and explain the causes. Then, I would have a paragraph or two explaining the difference in schools of thought towards unemployment. Some sentences make no sense whatsoever such as "Secondly, monetarist called it in particular industry the resulting that Frictional Unemployment it occurs on temporary." which could easily be sorted with a proof read! Unfortunately some of these sentences really detract from the quality of the analysis, as it suggests this essay doesn't have a strong understanding.


Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by groat 12/03/2012

Read less
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. Marked by a teacher

    Discuss the benefits of economic growth

    5 star(s)

    Government spending growth only made up a small part in the overall increase. For the UK especially, this rate of growth has been a very promising thing as it shows improvement from the decline during the recession. This growth shows that the UK is recovering at a decent rate.

  2. Peer reviewed

    Economic and Social consequences of Unemployment

    5 star(s)

    Fall in aggregate demand caused every household on the street to be unemployed. This made a total of 38 unemployed people on one street. A family had been unemployed for 7 years and they had 5 children. So, in order to make some money, they were selling everything they could.

  1. Peer reviewed

    GDP, or Gross Domestic Product.

    5 star(s)

    The GDP per capita figures need to ... be adjusted due to varying inflation rates around the world. A country which has higher inflation will see its value of GDP increasing relatively faster than a country with a lower inflation rate.

  2. Free essay

    Define and determine the types and trends of UK unemployment

    4 star(s)

    This is because, even in a highly mobile labour force, there will still be frictional unemployment, and possibly structural, these two types of unemployment are considered to be the 'natural rate of unemployment'.

  1. Explain what the main macroeconomic policy objectives are and why are there problems when ...

    Classical unemployment is though to be the result of real wages being above their market clearing level leading to an excess supply labour. Voluntary unemployment also exists, when a worker chooses not to accept a job at the going wage rate.

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

    is a country which highly depend on immigrants to boost their economy. The fall in the number of immigrants is 21.68%. Furthermore, the radical fall in manufacturing and services industries (refer to the Attachment 1.0) is the reason for the huge fall in the GDP for the year 2008 as

  1. Pakistan is in the grip of a serious energy crisis that is affecting all ...

    thus raising the demand supply gap to 5000 MW: HIGH COST OF FUEL The cost of crude has increased from 40 $ to 140 $/barrel s last couple of month it means the generation from thermal units are costing exorbitant price.

  2. Various Macro-Economic Questions and answers

    Also it doesn?t count the output from firms outside the UK. Explain in detail the determinants of growth Consumer Spending (C) ? The amount of income that the consumer spends on goods in an economy, the more spending, the more business have to increase productive capacity.

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