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  • Anforme What Impact does Unemployment have on the UK Economy?

Anforme What Impact does Unemployment have on the UK Economy?

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Ruth Tarrant, The Open University, discusses how higher levels of unemployment may lead to hysteresis, a higher government budget deficit and moderate pay increases. The demand for inferior goods and education may also increase.

Summary of Key Points:

  • Unemployment levels in the UK have risen since 2007,and now stand at around 8% (depending on which measure is used).
  • Unemployment may deepen and prolong a period of recession in the UK as it causes a fall in demand for goods/services, and may lead to hysteresis.
  • Unemployment has significantly worsened the UK government’s budget deficit, although this has also acted as an ‘automatic stabiliser’, thus preventing a further fall in aggregate demand.
  • Unemployment in the UK has led to a near ‘pay-freeze’ for many, although this has led to a rise in demand for some goods, such as inferior goods.
  • Unemployment and inflation are inversely related, and so as unemployment rises, inflation falls.
  • Unemployment may prompt an increase in demand for education and training, which can benefit the economy in the longer term.

This article is from ET Volume 17 Issue 4.

Ruth Tarrant, The Open University, discusses how higher levels of unemployment may lead to hysteresis, a higher government budget deficit and moderate pay increases. The demand for inferior goods and education may also increase.

Summary of Key Points:

  • Unemployment levels in the UK have risen since 2007,and now stand at around 8% (depending on which measure is used).
  • Unemployment may deepen and prolong a period of recession in the UK as it causes a fall in demand for goods/services, and may lead to hysteresis.
  • Unemployment has significantly worsened the UK government’s budget deficit, although this has also acted as an ‘automatic stabiliser’, thus preventing a further fall in aggregate demand.
  • Unemployment in the UK has led to a near ‘pay-freeze’ for many, although this has led to a rise in demand for some goods, such as inferior goods.
  • Unemployment and inflation are inversely related, and so as unemployment rises, inflation falls.
  • Unemployment may prompt an increase in demand for education and training, which can benefit the economy in the longer term.

This article is from ET Volume 17 Issue 4.

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