Identify and define the three types of unemployment. Which do you feel is the mo

Question

Identify and define the three types of unemployment. Which do you feel is the most important type of unemployment the government should work to reduce? Explain.

2. What action can the Federal Reserve take to reduce unemployment?

3. Using one of the tools available to the Federal Reserve, explain how the Fed would accomplish the action you listed in response to No. 2.

4. Assume the economy is currently operating at the natural rate of unemployment, what affects will the action you listed in response to No. 2 have in the short run on output, price level, and interest rates? Please use the AS/AD and Money Market diagrams to illustrate your answer.

5. Again, assume the economy is currently operating at the natural rate of unemployment, what affects will the action you listed in response to No. 2 have in the long run on output, price level, and interest rates? Please use the AS/AD and Money Market diagrams to illustrate your answer.

Explanation / Answer

Unemployment can be of three types; Cyclical,Structural and Frictional.Cyclical unemployment is caused by the contraction phase of business cycles.That is when the economy is in recession.Structural unemployment occurs because of an absence of demand for certain types of worker.Frictional unemployment occurs because normal turnover in the labor market and the time it takes for workers to find new jobs.Out of the three cyclical unemployment is the "worst" type (even though all types of unemployment are bad for people and the economy) as it reflects that they economy has slowed.Government intervention, in the form of expansive monetary policy and even fiscal policy, is usually required to stop the downward spiral.

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