– This is also known as demand deficient, persistent or Keynesian unemployment. – It is caused by aggregate demand in the economy being too low to create employment opportunities for everyone that wants a job.
– It tends to occur in the ‘bust’ period of the trade cycle.
– The Keynesian solution would be to boost aggregate demand (perhaps by running a budget deficit).
– Monetarists would continue to remove market imperfections, as they feel that this will naturally move the economy further towards full employment.
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