The Different Types of Unemployment in the Economy and Policies

Topics: Unemployment, Keynesian economics, Monetary policy Pages: 3 (1284 words) Published: May 24, 2014
Describe the different types of unemployment in the economy and explain the government policies used to address them Australia suffers from different types of unemployment in the economy, which is undesirable since Australia aims to achieve full employment; a major macroeconomic objective of the Australian Government. The main forms of unemployment which the Australian economy suffers from are cyclical, structural and long term unemployment. To address these main forms of unemployment in the economy, the Australian government has four main policies available to them to reduce unemployment. These include stimulatory monetary policy through cuts to interest rates, expansionary fiscal policy through an increase in government spending and/or cuts in taxes, industrial relations policy or wages policy to contain growth in aggregate wages and microeconomic reform policies to improve the economy’s resource allocation and productivity. Currently Australia suffers from cyclical unemployment which is caused by a contraction in economic activity or aggregate demand. With a drop in aggregate demand, the derived demand for labour drops too. This causes a loss in jobs and workers are laid off as a result in the fall of demand for labour. An example of when cyclical unemployment rose significantly was in 2008-09 due to the GFC and lower rates of growth which caused a decline in GDP growth and spending within the economy. To counter-act cyclical unemployment, monetary and fiscal policy can be used to offset cyclical downturns in the economy and increasing levels of unemployment that accompany periods of slow economic activity. Through fiscal stimulus and the easing of monetary policy, aggregate demand has the potential to stimulate as there could be an increase in government spending, investment or even consumption. In turn this could increase the output of goods and services in the economy. Given that the demand for labour is derived from the demand of goods and services that...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Different Types of Unemployment Essay
  • The power of Monetary and Fiscal Policy on the Economy Essay
  • Unemployment and Monetary Policy Essay
  • Policies Toward Unemployment Essay
  • Policies for Reducing Unemployment Essay
  • Major causes of unemployment, recent unemployment performance, policy options available to the government to achieve a sustained reduction...
  • Fiscal Policy for Reducing the Unemployment Rate Essay
  • The Effects of Long-Term Unemployment on the U.S. Economy Essay

Become a StudyMode Member

Sign Up - It's Free