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What diagrams to use in unemployment IA?

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  • 2 months later...

Hi there! Based on what you've said, I assume you need to show demand-deficient recession representing cyclical unemployment. It is always suggested to use the AD/AS model wherever possible. For the purpose of understanding, I have listed down below the main types of unemployment and possible graphs you could draw:

Cyclical Unemployment: Caused by either Demand-Deficient Recession (where the AD curve shifts below full employment levels on AD/AS classical model) or Negative Supply Shock (Stagflation) (where SRAS curve shifts to the left; a decrease in output as well as an increase in price)

Structural Unemployment: Caused by tech changes or foreign countries producing goods more cheaply; no diagram for this

Frictional, Seasonal Unemployment: No diagram again

Natural Rate of Unemployment/Full Employment: Diagram showing AD, LRAS and SRAS curve intersecting at full employment level of output. 

Let me know if you need me to clarify more and hope this helps! ;) 

Edited by VB1
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