Increasing Opportunity
Before we attempt answering that question, let's look back -- one more time -- at the three kinds of unemployment:
As we have said, the first of these, frictional unemployment, fits the New Classical understanding best, and the New Classical conclusions can probably be applied to it. Some frictional unemployment is efficient and no government policies should attempt to reduce it at all. If there is an inefficient excess of frictional unemployment, it should be reduced by policies that change search behavior and improve the effectiveness of job markets. Reductions in public subsidies to the unemployed would also have their impact on this component.
Aggregate Demand policies have been conceived with the second category, cyclical unemployment, mainly in mind. Let's go on to see how that would work, and then consider structural unemployment.
Increasing Opportunity
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