Unemployment | Model Answer
A-level Economics
Evaluate macroeconomic policies which may be used to reduce the level of unemployment in the UK. (25 marks)
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Evaluate macroeconomic policies which may be used to reduce the level of unemployment in the UK.
Possible definitions
Labour force
Unemployment
Macroeconomic policy
Background
Explain why policymakers would want to reduce unemployment
Policy 1: Monetary policy
How can monetary policy be used to help reduced unemployment?
What kind of monetary policy should be used?
What type of unemployment does it help reduce?
Why would monetary policy be effective?
Under what conditions would monetary policy be most effective?
When would monetary policy not be as effective?
Policy 2: Fiscal policy
How can fiscal policy be used to help reduced unemployment?
What kind of fiscal policy should be used?
What type of unemployment does it help reduce?
Why would fiscal policy be effective?
Under what conditions would fiscal policy be most effective?
When would fiscal policy not be as effective?
Possible diagrams
Long-run Phillips Curve
AD/AS
Long-run Philips Curve - Inflation and Unemployment are two objectives that conflict with one another.
Aggregate Demand is shifting to the right. This is due to expansionary demand-side policy like a reduction in interest rates or increase in the budget deficit.
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