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Macroeconomics: Theory and Policy by Vanita Agarwal

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21

Unemployment

After studying this topic, you should be able to understand

  • The labour force consists of both the employed and the unemployed.
  • The unemployment pool is formed by the unemployed persons at any point of time.
  • The natural rate of unemployment is the average rate of unemployment around which any economy fluctuates in the long run.
  • Frictional unemployment arises due to the time gap it takes for the workers to search for a job that best suits their individual skills and tastes, when the economy is at full employment.
  • Wait unemployment is caused by wage rigidity above the equilibrium level of employment.
  • Unemployment results in a loss in production and also leads to an undesirable effect on the distribution of income.
  • The Phillips’ ...

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