2025HSCShort answer

Q23 (c)

2 marks

Question

Use the information to answer parts (b)−(d).
The following information refers to a hypothetical economy which has a Non-Accelerating Inflation Rate of Unemployment (NAIRU) of 5%.

Year	Participation rate	Unemployment rate
Year 1	66%	4.5%
Year 2	62%	5.9%

Using the information provided on the previous page, outline a possible cause of the increase in unemployment present in the economy in Year 2.

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Solution

Criteria	Marks
Outlines the possible cause of the increase in unemployment present in the economy in Year 2, using the information provided	2
Provides some relevant information	1

Sample answer:

The unemployment rate of 5.9% in Year 2, which is above the NAIRU of 5%, suggests the presence of cyclical unemployment. Cyclical unemployment arises when there is insufficient demand for goods and services, leading to fewer employment opportunities during economic slowdowns.

Answers could include:

Structural unemployment.

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Syllabus alignment

Economic Issues

Growth, employment and inflationAnalyse growth, unemployment, inflation, distribution of income and environmental sustainability.

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