What is Demand-Deficient (Cyclical) Unemployment? | IB Macroeconomics | PREVIEW bradcartwright.com

More about this content:

In this step you'll learn about expressing unemployment on a diagram. In the neoclassical model, the natural rate of unemployment is 5%. A drop in aggregate demand will cause a recessionary gap and unemployment will be greater than 5%. On the other hand, an increase in aggregate demand will cause an inflationary gap and unemployment will be less than 5%. Both the neoclassical and Keynesian models can be used to express demand deficient unemployment."