Subject: Economics Unit 3 AOS 2 - Goal: Full Employment Question: Describe some problems caused by a failure to meet the goal of full employment Some problems: 1. INFLATION Remember, a rate of unemployment lower than NAIRU (non accelerating inflation rate of unemployment) is also a failure to meet the goal. A rate of unemployment lower than NAIRU results in excessive demand inflation, as more people can afford to buy goods and services. (Refer to Phillips curve for an explanation) 2. LOWERED MATERIAL LIVING STANDARDS Increased unemployment means people have less final income, because welfare / transfer income is generally less than factor income. Lower income = less goods / services = less needs / wants = erosion of material living standards 3. INEQUITY Often, where unemployment is high, it will be the lesser skilled, lower class workers who lose their jobs. This increases the gap between the rich and the poor, hence increasing inequity. This causes a range of problems, which you should be able to describe - remember to mention both material and non material living standards.
Posted on: Mon, 05 May 2014 12:34:31 +0000
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