HOW DO KEYNESIANS AND MONETARIST DIFFER IN THEIR PERCEPTIONABOUT THE CAUSES OF MASS UNEMPLOYMENT?The Keynesian theory of money is principally supported by the academic followers of JohnMaynard Keynes, an early 20th century economist who proposed alternatives to classicaleconomic theories. In the Keynesian theory, the economy was divided into two basic features:the "real economy," which determined factors of material production such as labor, and the"monetary economy," which affects factors of valuation such as price level. Keynesiansgenerally believe that events in the real economy, such as reduced labor demand or governmentfiscal policies, have a greater effect on economic growth or recession or unemployment thanevents that affect the supply of credit or money alone.However with the Monetarist Theory of Money, monetarists are particularly interested in theeconomic effects of policies regarding the size and structure of the money supply -- questionsregarding price levels, the value of currency and the availability of credit. Monetaristacademics are generally followers of the theories of Milton Friedman, a macroeconomist of themid-20th century. In general, monetarists believe that practices and events that affect theamount of money available for use by the economy have a more substantial impact on short-term productivity than do factors such as employment levels, aggregate demand or governmentfiscal policy.The debate between Keynesians and Monetarists is often considered to have been about the monetary transmission mechanism or the Phillips curve. However, an important element of the debate was in regards to unemployment and its effect on real output.The typical Keynesian story about unemployment is that an increase in unemployment reduces income, which reduces consumption, and reduces aggregate output. Individuals base decisions on current income receipts. Unemployment benefits thus serve to compensate the job loser from the fall in income.The monetarist view of unemployment, however, is framed within the context of Milton Friedman’s (1957) permanent income hypothesis. According to the PIH, permanent income is known, but there is uncertainty surrounding current receipts. A job loser whose behavior is characterized by the PIH will increase measured unemployment, but whether or not the job loss impacts real output depends on whether the change of circumstance results in a permanent downward revision of anticipated income. An increase in unemployment that is expected to only cause a change in receipts will not cause a reduction in consumption or real output.
EXAMINE THE MAJOR TYPES OF UNEMPLOYMENT AND THE NEED FORSUCH CATEGORIZATION.