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AQA GCSE economics 15 mark exemplar response to the question "Unemployment is universally bad for everyone in the economy, discuss this statement (15 marks)."$3.92
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AQA GCSE economics 15 mark exemplar response to the question "Unemployment is universally bad for everyone in the economy, discuss this statement (15 marks)."
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Course
Economics
Institution
GCSE
AQA GCSE economics 15 mark exemplar response to the question "Unemployment is universally bad for everyone in the economy, discuss this statement (15 marks)."
Unemployment is universally bad for everyone in the economy, discuss this
statement (15 marks).
Unemployment is the percentage of the labour force able and actively in search of
employment but who are unable to find a job at a given time. The labour force
excludes those who can’t work (such as those in further education and retirement)
and so these people are not included in the calculation.
Unemployment results in lower aggregate demand for goods and services in an
economy. This is because, without employment consumers lack an income to cover
expenses and afford luxury goods (or any wants). According to the circular flow of
income, one mans expenditure provides another man’s income, therefore a decrease
in incomes due to unemployment will reduce the amount of consumption in the
economy. As consumption is a component of aggregate demand, this will cause a
negative shift in AD from AD1 to AD2.
Price level
LRAS
PL1
PL2
AD2 AD1
Y2 Y1 Real GDP
This negative shift may cause a decrease in the real GDP of a country (negative
economic growth) leading to a negative multiplier effect of falling output, lower
incomes and universally lower living standards.
In addition, unemployment results in lower government tax revenues from direct
taxes such as income tax and corporate tax (as profits are lower from negative
economic growth) and indirect taxes such as VAT on consumer spending (as incomes
decrease so does spending). Lower tax revenue inhibits the government’s ability to
cover developmental spending without incurring debt which would further hurt the
country’s finances through poorer credit ratings, higher rates of interest and larger
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