Unemployment and the Foundations of Aggregate Supply

The United States enjoyed an extraordinary period of rapid economic growth and declining unemployment over the 1990s. From the trough of the last recession in 1992 until midyear 2000;,the number of employed workers grew by almost 30 million while unemployment fell by 4 million. Other regions, in Europe and East Asia, were not so fortunate and had persistently high unemployment. Although, better understanding of macroeconomics has allowed most countries to avoid the worst depressions, occasional bouts of high unemployment continue to plague many market economies. . In the present chapter, we first review the foundations of aggregate supply and see how unemployment
is determined by the interaction of aggregate supply and demand. We then examine the major policy issues surrounding unemployment.

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