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

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By Brad Cartwright on youtube.com

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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."

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