2013 HCI H1 Econs Essay Q4

--- Su (a) Cy Cy (re sto wo as In c o wo an do fal sa cu he St St p e mi ec un lab F r Fr wo int se wh 4 (a ) (b ) ---------------- uggested Ou ) Causes yclical Unem yclical unemp ecession or d ocks pile u p orkers, leadin s demand-de the recent ontractions as orld, tourism nd investmen ominated by lling global in ales are low e ut back on p r ence cyclical ructural Une ructural unem erform jobs o ismatch bet conomy can n nwilling to m o bour respecti rictional Unem rictional unem orkers to be to and out of earch for jobs hat they belie Marking ) Explain years. ) Discuss governm ---------------- utline: of Unemplo ployment ployment is c depression), p. Firms will ng to an incre eficient unem Global Fin a s a result of and internat nt (I) compo n high-end ma ncome could er than expe c roduction as unemployme mployment mployment a or change t h tween the w not immedia ove to anot h ively). mployment mployment ar e matched w the labour fo s and for firm eve will be th g Scheme the main the view ment in red ---------------- oyment in Si caused by a aggregate d then adjust ease in cycli mployment. ancial Crisis these extern tional bankin nents of AD anufactured g have a pro n cted sales a n actual stoc k ent rises. arises when c he location workers’ ski tely find jo b her area/reg i rises becaus with suitable orce and the s to find suita e best match HWA CH Year Two causes o f that supp ucing unem ---------------- ngapore in t lack of dema demand decr to the defi c cal unemploy (US sub-pr i nal shocks. T ng as well a s causing dom goods and se nounced adv nd firms ex p k levels exc e changes in te of jobs. As lls and job bs elsewher e ion where p e of imperfe jobs. It is als process of jo able employe h available, fr HONG INS o H1 Econo f unemplo y ly side p o mployment ---------------- the RECENT and in the do reases and f ciency of de m yment. There ime mortga g These shock s financial s e mestic consu ervices whic verse effect o perience an u eed desired echnology or a result of requiremen e because t h rospects ar e ect informati so known as ob creation a ees. Since bo rictional unem TITUTION omics 2013 yment in S olicies are t. --------------- T YEARS ownswing of t firms find th e mand by cu efore, cyclica ge crisis) in ks badly affe ervices secto mption to fa h tended to on export dem unplanned in levels. In s o r internationa this changi n nts. People a hey either d e better (occ ion in the lab search unem and job destru oth employer mployment a N 3 Singapore the best o --------------- the business ey cannot se tting back o al unemploym 2008/09, th cted our ex p ors. In short, ll. And sinc e have a high mand from S crease in st o o doing, firm s al competition ng structure are made re d do not have upational a n bour market mployment. T uction create rs and emplo arises. in the re c option for --------------- cycle. Durin ll all their cu on productio n ment is some e economy port trade wi t it hit our e x e exports fro income elas Singapore. As ocks. This w s will hire fe w n change the of the econ dundant in o the neces s nd geograph i t as it takes t The unending e the need fo oyees spend cent [10] the [15] ---------------- ng the downs rrent output, n and hire f e etimes referre went into s th the rest o xport revenue m Singapore sticity of dem s AD falls, a will cause th e wer workers e skills neede omy, there one sector o sary skills o r ical immobili time for g flow of peo r people to time searchi ------ wing and ewer ed to sharp of the e (X) e are mand, ctual em to s and ed to is a f the r are ty of ople ng

(b In Su an of Su AS giv T h un Bo Su 1. Sh me So sy to a f re Th ou Fig dr fu T h gr b) Discu s reducin troduction upply-side p n economy, growth of r upply side e S curve will ven level of his essay nemploymen ody: upply side SR SSP t hort-run su p easures tha ome of the e ystem, and t 13% in 200 falling aggre bates, utiliti he outcom e utput and low Figure 1 gure 1 de p rawing AD c ll-employme he use of sh rowth of th e ss the vie w ng unemplo : policies are make mark real national economics i shift outwa f output. shall disc u nt and whet policies ar to reduce C pply side p at yield only examples w temporary c 03 during SA egate dema es rebates e is illustra t wering gene : Short-run picts a pict u cutting at / ent level Yf. hort-run sup e economy w that sup p oyment. mainly mic kets and in d l output. s an approa ards, thus in uss wheth e ther there a re the best Cyclical Un policies pri m temporary will be price cut in CPF. ARS period and on cycli and rent reb ted by an i eral price le n supply-sid ure of slow near Keyne pply-side po is increased HWA CH Year Two ply side p o cro-econom dustries ope ach which fo ncreasing o er SSPs a re other bet option for employme marily targ e results. To and income For instanc . This effec ical unempl bates were ncrease in evel. de policies growth du e esian AS r a olicies is able d from Y 0 to HONG INS o H1 Econo olicies are ic policies d erate more focuses dire utput for an re the be s tter options the govern nt et at reduc fully solve t e policies s ce, employe tively lower oyment. Als adopted in the short- r s work to lo e to defici e ange) as eq e to shift the o Y1. Thoug TITUTION omics 2013 the best o designed to efficiently a ectly on the ny given lev st option i n in doing so nment in red ing busine s the problem uch as price er’s CPF co ed labour c so, other co 1999 to hel run aggreg a ower busine ency in de m uilibrium ou e SRAS cur gh it is not v N 3 option for t o improve t h and thereby Aggregate vel of prices n reducing . ducing une ss costs. T ms, other pol e controls, w ntribution ra osts, thereb ost cutting m lp firms stay ate supply ess costs ( mand (wea k utput at Y 0 rve from SR very signific the govern he supply-s y contribute Supply (AS or reducing the diffe r employmen They are u s icies have t wage freeze ate was red by cushionin measures lik y in the blac (SRAS) c u (during REC k AD -can b is much lo w RAS0 to SRA cant as AD ment in [ side potentia to a faster S). If succes g prices for rent cause s nt. sually stop - to be in plac e/ flexible w uced from ng the effec ke corporate ck. urve, incre a CESSION) be illustrate d wer than th a AS1. The ac is weak d u [15] al of rate ssful, any s of -gap ce. wage 16% ts of e tax asing d by at of ctual uring

HWA CHONG INSTITUTION Year Two H1 Economics 2013   recession, it helps to keep some business from going bust and thus save some jobs, thereby reducing cyclical unemployment. 2. LR SSP to reduce Structural Unemployment Education and Training  As the problem with structural unemployment lies wi th occupational immobility, one of the most direct solutions would be to help workers who are displaced and whose skills have become irrelevant, find new employment by equipping them with new ski lls. Hence, the government could focus its spending on the retraining of workers displaced from these industries, helping them acquire new skills to enter the new industries which had arisen as a result of shifts in comparative advantage, thereby easing structural unemployment. For example, firms could tap on the Skills Development Fund (SDF), as well as the Skills Programme for Upgrading and Resilience (SPUR) which was implemented during the 2009 Budget. These initiatives provide subsidies to firms who sent their workers for re-training or upgrading courses so as to raise labour productivity and retain their employability.  The government can design the education system to meet to the requirements of economic development. For example, more vocational schools and technical colleges should be set up to train more mechanics, foremen and technicians so as to overcome the problem of a shortage of skilled labour.