economic homework

Evaluate the important of managing aggeregate demand to bring about a sustained reduction in the rate of unemployment in the Uk economy?

Aggeregate demand is the demand of total products and services in a economy in period time.
Unemployment is the people avaiable for working,but have no job and looking for a job.
Rate of unemployment the percentage of the labour force who are out of work.

Managing aggeregate demand is very important to reduce rate of unemployment.The changing in demand is responsive and have relationship to rate unemployment.When AD is high , that rate will be reduced.When Ad is low, that rate will be increased.

We can use monetary policy,fiscal policy or supply-side policy to control and reduce that rate:

Monetary policy: central bank and/or government decisions on the rate of interest, the money supply and the exchange rate.
-Decrease interest rate->Firms will pay less interest when they borrow->they have less risks->increase investment confidence->more investment->rise supply for labours->reduce unemployment.
-Decrease exchange rate->lower export product price->increase overseas AD->A long time increase AS->reduce unemployment.
-Raise money->More money->spend more->Increase AD->...->reduce unemployment.

Fiscal policy:the taxation and spending decisions of a government.

-Reduce income tax->more disposable income->Increase AD->...->reduce unemloyment
-reduce corporation tax->more firms profit->increase investment->rise supply for labours->reduce unemployment.
-Increase gorvernment spending->rise confidence->increase AS and AD->....->reduce unemployment.

Supply-side policies:policies designed to increase AS by improving the efficiency of labour and product markets->rise supply for labours->reduce unemployment.

70% of total UK's GDP now comes from sector->change in AD of that will affect a lots in GDP.It also means increase in government spending and improve for service will raise GDP.They can use fiscal policy because it depends on government spending.Also they should reduce their dependance on producing services.It will reduce their risks for them.....
More more more.....