1. Unemployment By the end of this session, you:
Must know definitions for full employment.
Should understand the causes of unemployment.
Could be able to link the causes of unemployment to the current economic crisis.

2. Demand Deficient Unemployment

6. Unemployment What is the Hysteresis effect?
Why does high unemployment reduce inflation?
Give an example of a demand-side policy to reduce unemployment and explain how it works.
Give an example of a supply-side policy to reduce unemployment and explain how it works.

8. Supply-Side Policies
Explain how each of the following will remove labour market imperfections and achieve a lower equilibrium rate if unemployment:
Reform the welfare system to reduce the risk of the poverty trap.
Reduce trade unions’ collective bargaining power.
Reduce income tax.
Relax immigration laws.

9. Flexible Labour Markets
Occupational (functional) flexibility
Ease and cost of hiring and firing workers
Contractual flexibility
Wage flexibility
Geographical flexibility

10. Advantages and Disadvantages of Flexible Labour Markets
Rapid clearing of markets
Improved occupational mobility
Stronger employment creation
Attractive to inward FDI
Higher long-run productivity
Improves the inflation-unemployment trade-off
The economy copes with external shocks more effectively
Lack of training for workers on short-term contracts
Job insecurity
Increase in relative poverty
Increased pensioner poverty
Risk of ‘slash and burn’ during an economic downturn
Effects on family life

11. AD-AS and the Output Gap

12. Short-run Phillips Curve and the trade-off between unemployment and inflation

13. Expectations-augmented Phillips Curve

14. Long-Run Phillips Curve

16. Factors Explaining the Improved Trade-off between Unemployment and Inflation
Flexibility of the UK labour market
Benefits of immigration
Credible inflation targets
Low inflation in the global economy
Technological change and innovation
Increased competition in domestic and international markets