Question

URGENT
1) What type of unemployment applies to each of the following: a. Printers laid off due to drop in demand for printed catalogues and flyers as firms go the internet to promote an advertise their products. b. Factory workers in the UAE laid off as the plants shut down and move to Japan and Mexico If these situations occurred, How would you classify the unemployment? what solution would you suggest.

10 marks)  

2) What business cycle stage are we experiencing currently?(1mark) b. what are the different phases of business cycle? c. What is happening during each phase of the cycle with: output, employment and inflation.

  

Answer 1

1)

a. Structural unemployment. This type of unemployment focuses on the employment lost due to disruptive technology (in this case the internet). As internet replaced the traditional advertising medium, these printers have lost their jobs. So, it's a structural unemployment.

b. Involuntary unemployment. The workers are laid off in an involuntary manner due to the shut down of plants, with no other specific reasons. You might also sight this as an example of cyclical unemployment as the economic downturn caused the shutdown of the factory in the first place.

2)

We are in the contraction stage of the business cycle due to the global pandemic at the moment.

The 4 different phases of a business cycle are:

• Expansion
• Peak
• Contraction
• Trough

During expansion phase: Output increases and therefore the employment to produce the excess output in the economy. As a result of more output and higher employment, the purchasing power of households increase thereby money supply in the market increases. This ultimately leads to inflation.

At peak phase: All the factors mentioned in the expansion phase reaches their maximum level attainable.

During contraction phase: The economy's output (GDP) decreases therefore employers layoff workers who are no longer needed. This scenario is triggered by the slump in consumer expenditure in the economy which translates to a reduction in demand. Inflation almost vanishes, the prices drop and a state of recession is achieved.

At trough: All the mentioned factors reach the minimum levels, i.e. low employment, high recession and low output.

Hope this helps. Cheers!