Economics Model Answers | Evaluate macroeconomic policies which may be used to reduce the level of unemployment in the UK.

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.

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.

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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