Discuss the types of policies that could be implemented to reduce European unemployment
What will be an ideal response?
There are basically two sets of policies. First, policy makers could reduce labor market rigidities that some economists believe have contributed to the high unemployment. Some examples of labor market rigidities are high unemployment benefits, high minimum wages, and excessive job protection regulations. The second set of policies includes bad labor relations and inadequate macroeconomic policies.
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Refer to Figure 24-1. Ceteris paribus, a decrease in government spending would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
Consider a competitive market in which people consume at the point where their marginal rates of substitution between products X and Y are 3/5
In this same market, producers produce where their marginal rates of transformation between X and Y are also 3/5. However, producers are producing 7 of Y and 3 of X, and consumers wish to consume 5 of Y and 5 of X per unit of time. Explain how this situation can exist. Also determine if it represents an equilibrium or not. If not an equilibrium, what will tend to happen in the market?