Factors affecting unemployment

    • Thread Starter

    Hi, can anyone explain the factors affecting unemployment on a macroeconomic scale?

    More specifically; how does i) Inflation and ii) Interest rate affect inflation

    Goegraphical immobility of labour causes unemployment, so does economical activity in undesirable areas meaning that people cannot move out of those areas (as they cant afford too) to areas where there are jobs.

    Also it takes time for jobs to be filled i.e. recreuitment process and structural unemployment occurs i.e. industrys decline and new industries open all the time.

    High interest rates bring inflation down, but low interest rates increase inflation (but only in the long run)

    unemployment: probably the costs to a firm, the JSA level, tax level, wage rate/national minimum wage, power of trade unions, white collar unemployment if everyone is educated and skilled...

    inflation affect inflation? :p:

    high interst rates = people save more than spend = lower consumption = decrease in AD and decrease inflation
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