PART THREE: OPEN QUESTIONS Choose one of the following questions and answer in u

Question

PART THREE: OPEN QUESTIONS Choose one of the following questions and answer in using the space below. 1. What are causes of the unemployment in a market economy? What are the policy measures that may be used to reduce the scale of this problem? 2. Let's assume that the assumptions of the Keynesian model are met. Let's suppose: C-300+0.8 Y 300 G 200 T0.2 Y NX-100-0.4Y What is the multiplier? What is an equilibrium output? How an equilibrium output will change when a government will increase by 10%? How the change described in (c) will affect trade balance? a) b) C) d)

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Since only one question needs to be answered I will answer 1 question

The causes of unemployment

One of the major causes is lack of effective demand. Quite often during recessions we face lack of demand which reduces employment. E. G during great recession lakhs of people were rendered unemployed due to lack of demand

Also Pessimism leads to less investment and thus less demand. This Leds to unemployment

Other reason is structural change in economy which reduces demand for certain type of labour. E. G horse carts were replaced by modern vehicles which rendered cart drivers unemployed

In some offseasons there is less demand for labour. E. G during winter agriculture labour is rendered unemployed

Slow economic growth means creation of less jobs which results in unemployment Even otherwise higher population growth will lead to unemployment  

Less savings and investment also leads to unemployment

The main tools by which unemployment can be reduced is expansionary fiscal and/or monetary policy . Also Govt nerd to invest in training of labour so as to provide them new skills. More savings, investment and exports will also promote jobs. Increasing industrialisation and focusing on supply side problems can also increase employment..investment in new technology, RandD also will promote jobs. Controlling population will also reduce unemployment

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