... as in the long run macro economic forces would work to restore the economy to its long run equilibrium position thus creating extra demand for goods which would then create demand for labour. Classical unemployment is another type of unemployment which occurs when the labour market is in disequilibrium. Classical or real wage unemployment exists when the real wage rate is above that needed to clear the labour market even when the economy is booming. The wage rate may be too high because of government legislation (minimum wage) or because of trade unions forcing up wages above equilibrium level for a number of reasons. Frictional and search unemployment is another type of unemployment and is short term as most workers who loose their jobs move quickly onto new ones, however the amount of time spent unemployed varies. The higher the level of redundancy pay and unemployment benefit, the longer workers will be ...

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