The lesson
Explain the mechanism, then qualify the outcome. Use this page as a fast, high-quality revision pass—not a wall of notes to memorise.
The main types
Different causes require different remedies.
- Cyclical unemployment rises when weak aggregate demand reduces firms’ demand for labour.
- Structural unemployment arises when workers’ skills, location or industry experience do not match available jobs.
- Frictional unemployment occurs while people move between jobs; seasonal unemployment follows predictable changes in demand.
Policy needs a mechanism
A policy should be judged by how directly it addresses the source of unemployment.
- Expansionary fiscal or monetary policy can reduce cyclical unemployment if spare capacity exists.
- Training, retraining, mobility support and better job information can reduce structural mismatches.
- Evaluate time lags, public spending costs, inflationary pressure and whether jobs are genuinely available.
Worked exam thinking
Worked example: a changing industry
Prompt: A region loses manufacturing jobs while growing firms need software and engineering skills. What type of unemployment is likely and what is a suitable policy?
How to turn knowledge into marks
Use this answer route
For a focused explanation or short evaluation question on this topic:
- 1Define the core idea precisely.
- 2Explain the chain of cause and effect.
- 3Apply it to the context in the question.
- 4Evaluate a limitation, trade-off or condition.
Quick questions
Check your understanding
What is cyclical unemployment?
Unemployment caused by a fall in aggregate demand during a downturn.
Why might unemployment rise even when GDP grows?
Growth may be concentrated in capital-intensive sectors, productivity may rise quickly, or workers may lack the skills required for new jobs.
Is low unemployment always good?
Very low unemployment can raise wage and inflation pressure, but the effect depends on productivity, participation and labour-market conditions.