Unemployment

Question 1

Consequences of unemployment

Answer 1

1. Lower incomes and standards of living
2. Opportunity cost of unemployment and benefits payed
3. Costly as government pays unemployment benefits
4. Economy produces inside the PPC and so is inefficient
5. Resources are wasted
6. Chancellor loses revenue from tax
7. Externalities such as crime etc
8. Erosion of human capital - gradual loss of skills
9. Hysteresis - longer people are unemployed, the harder it is to gain work