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Unformatted text preview: Now that we have covered the types of unemployment and how to calculate the unemployment rate, let's go over what causes unemployment. There are four basic causes of unemployment in a healthy, working economy. These reasons for unemployment are: minimum wage laws, labor unions, efficiency wages, and job search. In the real world economy all four of these forces work together to create the unemployment that is reflected in the unemployment rate. Minimum Wage Laws In microeconomics, we learned that in an efficient market, the price of a good changes to equilibrate the quantity demanded and the quantity supplied. The labor market, in its natural form, is just like any other market. If there are unemployed workers who want jobs, the price of labor or the wage will simply drop until all of the labor force is employed. That is, this would happen if there were not government intervention into the employed....
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- Fall '10