Research for the consequences of unemployment
* Improve the current account position
Less spending on imports
Some products for the domestic market will be sold to the export market instead Good because it may increase AD
-The hysteresis effect describes a possible consequence of a country experiencing persistently high rates of long term unemployment. Hysteresis means “to be behind” and it relates to the economic costs of unemployment because of the damage that unemployment does to the skills and employability of those people out of work. The longer someone remains out of a paid job, the less attractive they become to a potential employer. Technical and social skills can become eroded. The incentives to prolong the search for work are damaged and the end result can be an increase in “core” structural unemployment and a consequent rise in the natural rate of unemployment. -Overcoming the problem of hysteresis is now a major policy issue within the European Union where several countries are suffering from extremely high and damaging rates of unemployment, much of which is long term in nature.
* firms can expand
* Loss of tax revenue
Unemployment will immediately cause a fall in direct tax & indirect tax. As lesser number of people is working, government receives lesser income tax. As firms felt the impact of negative multiplier effect, they make lesser profit or losses. So government collects lower corporation tax. Also since lesser people spend money onto buying goods & services, there would be fall in VAT Fiscal costs to the government
High unemployment has an impact on government expenditure, taxation and the level of government borrowing each year An increase in unemployment results in higher benefit payments and lower tax revenues. When individuals are unemployed, not only do they receive benefits but also pay no income tax. As they are spending less they contribute less to the government in indirect...
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