Mahir_G11 Econ Unemployment essays - b Evaluate the policies available to a government that wishes to reduce it's country's unemployment rate[15 marks

Mahir_G11 Econ Unemployment essays - b Evaluate the...

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b) Evaluate the policies available to a government that wishes to reduce it's country's unemployment rate. [15 marks]. The unemployment rate of a country is the percentage of unemployed workers in the total labour force. For example, the unemployment rate in Belgium is 5.6%. The government can use either demand-side policies or supply-side policies to reduce unemployment. Demand-side policies are attempts to increase aggregate demand, thus reducing unemployment, as more workers are needed to cater for the increased demand of the population (Usually for cyclical unemployment). Cyclical unemployment is when workers lose their jobs because of downturns in the business cycle. Supply-side policies are attempts to increase productivity and increase efficiency in the economy, shifting aggregate supply to the right, increasing the demand of workers for businesses, thus reducing unemployment. To reduce the country’s unemployment rate, the government could change its monetary policy by cutting interest rates to boost consumption and investment, which are components of aggregate demand, ceteris paribus, aggregate demand will shift to the right, so businesses will need to employ more workers to meet these demands, reducing the unemployment rate. The government could also change its fiscal policy by cutting taxes. This would give consumers and businesses more disposable income, increasing consumption and investment, which are components of aggregate demand, ceteris paribus, aggregate demand shifts to the right, so there will be more job openings, reducing the country’s unemployment rate. These demand-side

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