Macroeconomics: What are the Main Causes of Unemployment in an Economy?

Essay by vanna88High School, 12th gradeA+, December 2005

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Unemployment is present in every economy and measures how healthy an economy is. It is when workers who are able and willing to work don't have jobs. It is quite impossible to reach zero unemployment no matter how high aggregate demand is because there is always 'natural unemployment' that would occur in most businesses booms. A country measure's unemployment by taking the unemployment rate, which is the number of unemployed, expressed as a percentage of the labor force. (Labor force-the total number of people who do have jobs + people who are unemployed).

There are always people entering and others leaving unemployment. The difference between the number entering and the number leaving will determine if unemployment rise or falls. Although, different countries have different methods of measuring unemployment, which is by the results, is not always suitable to be compared.

The unemployment measured rate of a country is not always accurate as only those who are registered as unemployment will appear in the countries statistics in which they receive unemployment benefits in MEDC's.

LEDC's don't have benefits available, so the reliability of the statistics of unemployment rate isn't accurate at all as they are many not registered as unemployed.

There are many reasons in which cause unemployment. Every economy has an 'natural unemployment rate' even when the market clears because the demand for labor and supply of labor is in equilibrium. The three 'natural unemployment' includes frictional, structural and seasonal unemployment.

Frictional unemployment is when workers are switching between jobs, finding the right job or employer finding the right worker and temporarily don't have jobs. They are at a process of searching for a job and are at a process of searching, traveling, applications and interviews for the right job. This is present in every...