SAJC 2024_Full Employment_Students

ST ANDREW’S JUNIOR COLLEGE JC2 H2 ECONOMICS 2024 FULL EMPLOYMENT In this set of notes, we will examine the next macroeconomic goal – full employment. We examine the different types of unemployment, their causes, and consequences to different economic agents. We look at how unemployment may affect standard of living and the macroeconomic policies to deal with unemployment to improve the standard of living of a country. Important concepts and tools and analysis  Full employment  Unemployment  Demand-deficient unemployment  Structural unemployment  Frictional unemployment Key questions to consider 1. How does a country measure the level of unemployment in their economy? 2. Why does a government want to achieve full employment in a country? 3. What are the different types of unemployment? Are they all caused by the same thing? 4. How does unemployment affect the microeconomic goals of the government? 5. How does unemployment affect the macroeconomic goals of the government? 6. How does unemployment affect the standard of living? 7. Can all types of unemployment be solved with the same policy? Are there particular circumstances that will make certain policies more effective in reducing unemployment levels?

St. Andrew’s Junior College Economics Department 2024 2 Contents 1. Unemployment Basics ....................................................................................................................................................... 3 1.1. Unemployment rate ................................................................................................................................................. 3 1.2. Factors affecting the unemployment rate ........................................................................................................... 4 1.3. Natural Rate of Unemployment ............................................................................................................................ 4 2. Types and Causes of Unemployment ............................................................................................................................ 6 2.1. Demand-Deficient Unemployment ........................................................................................................................ 6 2.1.1. Causes of Demand-Deficient Unemployment ................................................................................................ 6 2.1.2. Explanation using the AD/AS framework: ..................................................................................................... 6 2.2. Structural Unemployment ....................................................................................................................................... 7 2.2.1. Causes of Structural Unemployment ........................................