Chapter 7: Problem 4

Can government do anything to reduce the number of people in the following categories? If so, what? a. Frictionally unemployed b. Structurally unemployed c. Cyclically unemployed

Short Answer

Expert verified

Answer: The three types of unemployment mentioned are frictional, structural, and cyclical unemployment. The government can address frictional unemployment by implementing policies that make it easier for people to find jobs, such as providing job search resources and promoting economic growth. To reduce structural unemployment, the government can invest in education, training, and retraining programs that focus on teaching individuals the skills they need to adapt to the changing job market. Lastly, to reduce cyclical unemployment, the government can implement countercyclical fiscal and monetary policies, such as increasing government spending, providing tax cuts, adjusting interest rates, or increasing the money supply, to stimulate economic growth during a recession.

Step by step solution

Understanding Frictional Unemployment

Frictional unemployment refers to the type of unemployment that occurs when people are in between jobs or looking for new jobs after quitting or being laid off from their previous jobs. This type of unemployment is generally short-term and is seen as a natural part of the economy.

Government Action for Reducing Frictional Unemployment

The government can take steps to reduce frictional unemployment by implementing policies that make it easier for people to find jobs. Such policies may include providing better access to job search resources, offering training programs for specific skills, and improving the overall job market by promoting economic growth.

Understanding Structural Unemployment

Structural unemployment occurs when the skills of the available workforce do not match the skills required for available jobs. This type of unemployment is more long-term and often occurs due to technological advancements or changes in the economy.

Government Action for Reducing Structural Unemployment

The government can address structural unemployment by investing in education, training, and retraining programs. These programs should focus on teaching individuals the skills they need to adapt to the changing job market. Additionally, the government could provide incentives for businesses to invest in worker training programs or to create more job opportunities that match the skills of the workforce.

Understanding Cyclical Unemployment

Cyclical unemployment is a result of the fluctuating economic cycles, specifically when an economy is in recession. Cyclical unemployment occurs when there is a general slowdown in economic growth, leading to a decline in overall demand for goods and services, which, in turn, results in businesses cutting back on their workforce.

Government Action for Reducing Cyclical Unemployment

To reduce cyclical unemployment, the government can implement countercyclical fiscal and monetary policies. Fiscal policies involve government spending and taxation, wherein the government can increase spending on public projects or provide tax cuts to stimulate economic growth. On the other hand, monetary policies by the central bank, such as adjusting interest rates or increasing the money supply, can also help stimulate economic growth and reduce unemployment during a recession.

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!