Theory question 108
Labour MarketSection B (answer four questions only from this section)
(a) Define the term unemployment.
(b) Highlight the effects of unemployment on an economy.
Show the model answer
Model answer
(a) Unemployment is a situation in which people who are able and willing to work at the current wage rate cannot find jobs.
(b) Loss of output, so national income is lower than it could be.
Low standard of living and poverty.
Increase in crime and social vices.
Waste of human resources and skills.
Loss of government revenue from income tax and increased welfare spending.
Rural-urban migration and brain drain.
Fall in aggregate demand, which worsens recession.
Political instability and unrest.
Increased dependency burden.
Explanation
Explain at least five effects.