Problem 1
How is high unemployment explained by (a) a Keynesian and (b) a classical economist?
Problem 2
Which of the following statements is correct? The fact that unemployment rose in 2009 in the UK by less than originally predicted shows that: (a) the fall in output and demand was illusory; (b) wages were more flexible than in previous recessions; (c) firms believed that lower output would be very short lived?
Problem 3
What is the discouraged worker effect? Suggest two reasons why it occurs.
Problem 5
Explain why boosting demand sometimes fails to reduce unemployment.
Problem 8
'An increase in national insurance contributions by workers reduces the income per hour that workers take home and therefore reduces the incentive to work. ' An increase in national insurance contributions, by reducing income per hour, forces people to work longer hours to attain their target take-home income.' Is either statement correct? Are both correct? What light does this shed on national insurance contributions as a 'jobs tax'? Draw a diagram to illustrate your answer.
Problem 9
Labour supply \(L\), job acceptances \(J\) and labour demand \(D\) are,
respectively, related to the real wage \(W\) by:
$$
L=10+W, J=b W, 0
Problem 10
Suppose the government wants to encourage lone parents to take part-time jobs and thinks 15 hours a week is consistent with children being in a crèche for 3 . hours a day, Monday to Friday. Which of the following might achieve the government's aim: (a) an additional lump-sum payment to lone parents, (b) a lower income tax rate for lone parents, or (c) a payment conditional on their taking at least 15 hours of work a week?
Problem 11
Common fallacies Why are these statements wrong? (a) Unemployment is always a bad thing. (b) So long as there is unemployment, there is pressure on wages to fall. (c) Unemployment arises only because greedy workers are pricing themselves out of a job.
