Running head: DETERMINING CAUSE AND EFFECT 1 DETERMINING CAUSE AND EFFECT OF UNEMPLOYMENT 2 Determining Causes and Effects Name Institution Instructor Course title Determining Causes and Effects of Unemployment Introduction Unemployment comes about when an individual who is actively seeking employment is not able to obtain work (Marshalle, 2006). Unemployment is frequently used to gauge the health of an economy. The most regularly cited unemployment measure is the rate of unemployment. This is usually described as the number of unemployed individuals divided by the amount of individuals in the workforce. Many varied unemployment rate variations exist with different descriptions regarding who is an “unemployed individual” and who is within the “workforce.” For instance, the United States BLS (Bureau of Labor Statistics) frequently quotes the "U-3" rate of unemployment as the official rate of unemployment, but this description of unemployment doesn’t incorporate unemployed people who have become disheartened by a daunting labor market and have abandoned hope to find work (Malinvaud & Caffè, 2004). The different economic schools thought vary on their elucidation of the unemployment cause. Keynesian economics suggests that there exists a natural unemployment rate for the reason that the laborers skills and the openings available are somewhat beyond sync even in the best economic environments. Neoclassical economics proposes that the work market is effective if left alone (Stone, 2009). With that said, the goal of this paper is to discuss the various causes of unemployment, their effects on the economy and their effects on people. Unemployment Causes The exact unemployment cause will always be debated because there are many predictions, explanations, and theories set forth by economists. Considering the Keynesian theory, it asserts that, unemployment upshots from a growth in demand rates, whereas the economy works below its potential output and growth rate (Nicholas, 2006). Hereafter, the economy encounters a huge blow under the following circumstance. Often unemployment is brought about by various economic issues. For instance, the recession was among the major unemployment causes in the U.S.in 2007. It developed into a global crisis in which the unemployment rate knew no limits. A grave financial crisis hit virtually all countries all through the world. Increase in unemployment became a regular issue. People stayed unemployed while waiting for the economies redeemed stability (Marshalle, 2006). Another economic issue is inflation. It is one of the long-standing causes of unemployment. An economy of a state faces a sharp rise in prices of commodities as matched to other world’s economies. This brings about the breakdown in exports, as businesses are unable to contend with others because of a rise in price. Returns suffer, people's inves.

1. Running head: DETERMINING CAUSE AND EFFECT
1
DETERMINING CAUSE AND EFFECT OF UNEMPLOYMENT
2
Determining Causes and Effects
Name
Institution
Instructor
Course title
Determining Causes and Effects of Unemployment
Introduction
Unemployment comes about when an individual who is actively
seeking employment is not able to obtain work (Marshalle,
2006). Unemployment is frequently used to gauge the health of
an economy. The most regularly cited unemployment measure is
the rate of unemployment. This is usually described as the
number of unemployed individuals divided by the amount of
individuals in the workforce. Many varied unemployment rate

2. variations exist with different descriptions regarding who is an
“unemployed individual” and who is within the “workforce.”
For instance, the United States BLS (Bureau of Labor Statistics)
frequently quotes the "U-3" rate of unemployment as the
official rate of unemployment, but this description of
unemployment doesn’t incorporate unemployed people who
have become disheartened by a daunting labor market and have
abandoned hope to find work (Malinvaud & Caffè, 2004).
The different economic schools thought vary on their
elucidation of the unemployment cause. Keynesian economics
suggests that there exists a natural unemployment rate for the
reason that the laborers skills and the openings available are
somewhat beyond sync even in the best economic environments.
Neoclassical economics proposes that the work market is
effective if left alone (Stone, 2009). With that said, the goal of
this paper is to discuss the various causes of unemployment,
their effects on the economy and their effects on people.
Unemployment Causes
The exact unemployment cause will always be debated because
there are many predictions, explanations, and theories set forth
by economists. Considering the Keynesian theory, it asserts
that, unemployment upshots from a growth in demand rates,
whereas the economy works below its potential output and
growth rate (Nicholas, 2006). Hereafter, the economy
encounters a huge blow under the following circumstance.
Often unemployment is brought about by various economic
issues. For instance, the recession was among the major
unemployment causes in the U.S.in 2007. It developed into a
global crisis in which the unemployment rate knew no limits. A
grave financial crisis hit virtually all countries all through the
world. Increase in unemployment became a regular issue.
People stayed unemployed while waiting for the economies
redeemed stability (Marshalle, 2006).
Another economic issue is inflation. It is one of the long-
standing causes of unemployment. An economy of a state faces
a sharp rise in prices of commodities as matched to other

3. world’s economies. This brings about the breakdown in exports,
as businesses are unable to contend with others because of a rise
in price. Returns suffer, people's investments fall and slowly
companies start to fire people since they are not able to
recompense them (Gowland, 2000). Consequently, the
unemployment rate increases.
Unemployment is also brought about by changing technology.
Since technology goes on advancing with every passing day, the
majority businesses look for a transformation in the workforce.
Even though, they don’t fire individuals arbitrarily, they hire
persons having specialism in the advanced technologies. A sort
of disproportion is produced when they halt involving their own
staffs in major production and development areas. This
generates frustration in the workplace and many decide to
resign (United States, 1982). Therefore, old employees get
replaced by the fresh ones and the former stay unemployed
either permanently or temporarily. In short, it can be stated that,
job cuts attributable to changing technology raises seasonal
unemployment rate.
Unemployment rates are also heightened by lack of experience.
Among the young people, the unemployment rates tend to be
more than for other sections of people. This is attributable to
experience shortage which makes it ever harder for them to get
jobs, and they cannot acquire the experience they require unless
they find somebody who is prepared to hire them.
To conclude, is the issue of voluntary unemployment. There
exist some individuals who are between employments on
account of decisions they have made (Stone, 2009). They might
have resigned from work hopeful of a moving to other locales
before they have a different job arrangement or are planning to
go back to school.
Effects of Unemployment on the Economy
There are financial costs that come with unemployment. The
nation and the government suffer. In most nations, the
government must pay the unemployed individuals some
benefits. The bigger the amount of the unemployed people or

4. the longer these individual stays unemployed the more the cash
the government must relinquish (Malinvaud & Caffè, 2004).
Consequently, the nation must deal with both decreased
production and lost income as well as additional cost.
Unemployment gravely affects the spending power. Unemployed
individuals and their families spending power decrease
significantly and they would prefer to save instead of spending
their cash, which consequently affects the economy
unfavorably. (Marshalle, 2006)
Finally, with the increase unemployment rates other economic
aspects are considerably affected, for instance: the income per
individual, health costs, health care quality, leaving standard
and poverty (Stone, 2009).
Effects of Unemployment on People
As a result of unemployment people experience strained
relationships. Money is extremely essential to keep things on a
smooth flow. With little or no money available, the family head
is under constant stress, which disrupts the physical and
emotional health of everybody. A distressed mental mind frame
brings about frequent conflicts amid the spouses, and this
ultimately affects the psychological framework of kids in the
household. The family members’ relationships comes under a
great deal of strain. The tiniest reasons become an origin for a
great deal of friction amongst everyone, and consistently, there
is on no occasion any happiness or peace around the house
(Nicholas, 2006).
Most housing issues are as a result of unemployment. Issues
connected to housing often arise with joblessness. The family
might need to move to a different house with lower rent. People
living in their private houses might face difficulties in paying
the repayments of home mortgages they might have acquired to
buy their house (Stone, 2009). The general lifestyle of an
individual or family is impeded as a result of housing-related
problems.
Lastly, most illegal activities are usually connected to
unemployment. Rather often, individuals tend to lean in the

5. direction of resorting to something, which is illegal, so as to
make some cash, when all other alternatives run dry (Gowland,
2000). Not everybody turns into criminal activities by choice.
Recurrent failures in acquiring employment may turn an
individual or a family member into running some illegal trade,
working for criminal groups, etc., in order to sustain
him/herself or his/her family.
Conclusion
As seen, unemployment comes about when an individual who is
actively seeking employment is not able to obtain work.
Understanding unemployment causes and effects embroils more
than exploring the person who is between employments.
Unemployment has a far-reaching effect on several parts of
society.
References
Malinvaud, E., & Caffè, F. (2004). Diagnosing unemployment.
Cambridge: Cambridge University Press.
Nicholas, K. (2006). The social effects of unemployment in
Teesside. Manchester: Manchester University Press.
Marshalle, M. I. (2006). Economics of unemployment. New
York, NY: Nova Science Publ.
Gowland, D. (2000). Money, inflation and unemployment. Cape
Town: Pearson Education South Africa.
United States. (1982). Unemployment: Its causes and effects :
hearing before the Committee on the Budget, House of
Representatives, Ninety-seventh Congress, second session,
October 20, 1982, Janesville, Wis. Washington: U.S. G.P.O.
Stone, J. (2009). Unemployment: The shocking truth of its
causes, its outrageous consequences and what can be. Sl.:
Trafford on Demand Pub.