Unemployment

To deal with cyclical unemployment, what can the government do?

Cyclical unemployment

Reduced demand for a product causes firm to have a reduced demand for labor causing people to get fired

Wages will ↓ not because it would lower worker productivity

The government can ↑ AD by ↑ government spending

What are some of the effects of unemployment, both for the individual and for the economy?

Lost output in the economy

↓employed= ↓output

Deflationary gap= ↓wages & price

Lost revenue for the government

↓output = taxes on corporations will generate ↓ revenue

Unemployed→ ↓consumption→ ↓ sales tax revenue

Lost income

Individuals will had difficulty maintaining their former lifestyle

Consumption will ↓ = shift AD left

Shift in AD → ↓ price levels and wages leading to further lost income

↓ mental & physical health

↑ chances to experience mental illness, depression and ↓ self esteem

Mental illness along with lack of access to healthcare and proper nutrition contribute to ↓ physical health

↑ rates of crime

Unemployed have an ↑ likeliness to commit crimes

Physical crimes are a means of income and security when employment is lacking

Financial crimes like tax/insurance fraud