Reducing_Unemplyment

Reducing Unemplyment If you were an advisor to the government what would you suggest could be done to significantly reduce the national level of unemployment The economy of country X is in a slowdown and we have cyclical unemployment. In the short run demand determines supply. This means that we have excess capacity, i. e. the economy works under capacity. Due to decreased aggregate demand we have decreased demand for labor. In the short run the prices are rigid, so this decreased demand for labor is expressed as a direct unemployment. Our task in the short run is to try to reduce the level of this kind of unemployment. Our first step is to try to increase aggregate demand. Increasing aggregate demand, we will increase output and the increased output will increase the demand for labor. Aggregate demand consists of Consumption, Investment, Government expenditures and Net exports. The first thing we could do is to increase government expenditures. The increased government expenditures will shift aggregate expenditures schedule up and so increase aggregate demand. So let’s apply this fiscal policy. It is very important where our government is going to spend its money. market, employment, labour, increase, strategy, unemployment, government, demand, rate, economic, policy, development, expenditures, cleaners, people, investment, high, run, increased, aggregate, active, accountants, time, supply, social, main, jobs, interest, first, economy, changes, work, money, measures, labor