Question

Distinguish between `Involuntary Unemployment' and `Voluntary Unemployment'.

Hint:

In Keynesian economics, the focus is on eliminating Involuntary unemployment through fiscal and monetary policy. Voluntary unemployment is generally not addressed by policy.

Answer 1

Step 1: Understanding the Concept:
Unemployment is a condition where able-bodied persons who are willing to work at the existing wage rate are unable to find a job. However, not all non-working individuals are considered unemployed in economic terms.

Step 2: Detailed Explanation:
Involuntary Unemployment:
A situation where able-bodied people who are willing to work at the prevailing wage rate cannot find employment. It arises due to lack of job opportunities in the economy. It is a genuine concern for policymakers and is counted in unemployment statistics.
Voluntary Unemployment:
A situation where a person is technically able to work but chooses not to work at the existing wage rate, perhaps because they find the wage too low or are waiting for a better opportunity. They are not considered unemployed in the official count.
Key Difference: Involuntary unemployment is caused by market failure; voluntary unemployment is a personal choice.

Step 3: Final Answer:
Involuntary unemployment is when willing workers cannot find jobs; Voluntary unemployment is when able workers choose not to work at the current wage.