... therefore reduce due to the reduction in aggregate demand and therefore entrepreneurs will look to cut costs and to do this will make their workforce smaller. However if aggregate demand increase (D3) there will be an increase in supply (S3) and therefore entrepreneurs will look to maximise profits and will employ more workers to be able to obtain this new level of supply. Therefore if aggregate demand fluctuates then employment levels will follow the level of aggregate demand. If aggregate demand is high unemployment will be low and if aggregate demand is low then unemployment will be high. (b)(ii) Explain three other possible causes of unemployment. (6 marks) Another possible cause of unemployment is residual unemployment. Residual unemployment is people who are sick or disabled who cannot get a job because entrepreneurs are not willing to employ them due to their condition. Therefore if there is a large percentage of ill ...

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