Depressed Economic Demand Unemployment Cause

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A Depressed Economic Demand Unemployment Cause is an unemployment cause that is due to drop in aggregate economic demand.



References

2014

  • (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/unemployment#Cyclical_unemployment Retrieved:2014-3-14.
    • Cyclical, deficient-demand, or Keynesian unemployment, occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Demand for most goods and services falls, less production is needed and consequently fewer workers are needed, wages are sticky and do not fall to meet the equilibrium level, and mass unemployment results.[1] Its name is derived from the frequent shifts in the business cycle although unemployment can also be persistent as occurred during the Great Depression of the 1930s.

      With cyclical unemployment, the number of unemployed workers exceeds the number of job vacancies, so that even if full employment were attained and all open jobs were filled, some workers would still remain unemployed. Some associate cyclical unemployment with frictional unemployment because the factors that cause the friction are partially caused by cyclical variables. For example, a surprise decrease in the money supply may shock rational economic factors and suddenly inhibit aggregate demand.

       Keynesian economists on the other hand see the lack of demand for jobs as potentially resolvable by government intervention. One suggested interventions involves deficit spending to boost employment and demand. Another intervention involves an expansionary monetary policy that increases the supply of money which should reduce interest rates which should lead to an increase in non-governmental spending.

  1. Keynes, John Maynard (2007) [1936]. The General Theory of Employment, Interest and Money. Basingstoke, Hampshire: Palgrave Macmillan. ISBN 0-230-00476-8. http://cepa.newschool.edu/het/essays/keynes/keynescont.htm. [dead link]

2013