A) Explain the three main types of unemployment experienced within an economy Provide at least one example demonstrating each type of unemployment (4 points)
1) Frictional unemployment: Frictional unemployment occurs when individuals are temporarily between jobs or transitioning from one job to another. This type of unemployment is often a natural part of a healthy labor market as individuals search for better job opportunities. For example, a recent college graduate who is searching for his first job in his field of study would be considered frictionally unemployed.
2) Structural unemployment: Structural unemployment occurs when there is a mismatch between the skills and qualifications of workers and the available job opportunities in the economy. This type of unemployment is often caused by changes in technology, shifts in consumer demand, or changes in the structure of industries. For example, the decline of the coal mining industry in certain regions may lead to structural unemployment for workers with specific skills in that industry.
3) Cyclical unemployment: Cyclical unemployment is caused by fluctuations in the business cycle, with unemployment rising during economic downturns and falling during economic expansions. This type of unemployment is closely linked to the overall performance of the economy and can be particularly severe during recessions. For example, during the global financial crisis of 2008, many companies were forced to lay off workers due to reduced consumer demand, leading to a spike in cyclical unemployment.