[Study Notes] Macroeconomics – Unemployment

Unemployment is one of the widely used barometers to check the current economic status. Therefore it is natural that unemployment is the main topic of macroeconomics.


In macroeconomics, there are several types of unemployments 

  • Frictional 
    • People are voluntarily between jobs or leaving them
    • Freedom and Vitality
  • Seasonal
    • Due to the natural annual cycle of the seasons
  • Cyclical
    • Due to the business cycle of booms and recessions
  • Structural
    • Some types of jobs become obsolete due to the technological/social/political changes

Different economic schools differ on how to approach the problem.

The classical school insists unemployment is a self-correcting problem. Labor market is just like other markets of products; supply, demand, and price (wage) will automatically handle the situation. In this view, unemployment is a surplus in the labor market.

Meanwhile, the Keynesian school thinks the labor market is not a free-market in reality. For full employment, government intervention is required. Basic economic activities, such as consumption and investment, might not enough to keep the unemployment rate stable. In this case, government Spending can be a key player in solving the problem.

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