1 Identify and define the three types of unemployment Which

1. Identify and define the three types of unemployment. Which do you feel is the most important type of unemployment the government should work to reduce? Explain.

2. What action can the Federal Reserve take to reduce unemployment?

3. Using one of the tools available to the Federal Reserve, explain how the Fed would accomplish the action you listed in response to No. 2.

4. Assume the economy is currently operating at the natural rate of unemployment, what affects will the action you listed in response to No. 2 have in the short run on output, price level, and interest rates? Please use the AS/AD and Money Market diagrams to illustrate your answer.

5. Again, assume the economy is currently operating at the natural rate of unemployment, what affects will the action you listed in response to No. 2 have in the long run on output, price level, and interest rates? Please use the AS/AD and Money Market diagrams to illustrate your answer.

Solution

Post one more question to get the remaining answers, since all question contains sub-parts

1) There are three types of unemployment namely frictional, structural and Cyclical

Frictional Unemployment is defined as the unemployment because of people moving or changing their current occupations and going to some other profession

Structural Unemployment is defined as the lesser demand for particular type of work

Cyclical Unemployment is defined as people losing their jobs due to business cycle fluctuations in the output

The government must tackle the structural unemployment and start creating more jobs of particular kind, since people are more constrained in the structural employment

2)

a) they must target the economy of the country and not the inflation of the country, so that people have enough resources

b) Define a target unemployment rate even if it increases the inflation rate in order to reach the desired target, then also steps must be taken to increase the employment index of the particular country