Tuesday, September 20, 2011

Demand-deficient unemployment/ Cyclical unemployment



Ms. Employ-me reads this morning that economy is presently in slower growth. She also finds out that such downturn created a decrease in consumer's demand of goods and services and further led to a fall in supply by the firms. Thus, the firms reduced the number of employees as there was a fall in production. The unemployment rate has increased. Ms. Employ-me finally realizes why she was fired. She used to work at bread producing firm and after reading the newspaper, she is pretty certain that her dismissal was due to the economy. Then what is the government doing? She does not know much about economy but she knows it is the time for government to come up with fiscal policies to increase the aggregate demand of the labor and reduce the unemployment rate. She wants to work again.

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