Why is it difficult to distinguish between frictional, structural, and cyclical unemployment? Why is unemployment an economic problem? What are the consequences of a negative GDP gap? What are the noneconomic effects of unemployment?

1. Frictional unemployment occurs when a person quits the job and the time taken to find a new job. Structural unemployment occurs due to the mismatch between the skills labor have and the skills required by the industry. Cyclic unemployment occurs because of the cyclic fluctuations in the economy.

It is not easy to distinguish between the frictional, structural, and cyclic unemployment because there is no label on the type of unemployment when labor is included as unemployed. The type of unemployment changes with changes occurring in the economy. For instance, labor who is counted friction unemployed may change to structural unemployment if the economy undergoes through technological advancement. On the other hand, during the time of recession, the labors will face cyclic unemployment.

2. Unemployment is an economic problem because the labors who should indulge in the productive activity to add in the GDP of the economy is idle. The resources of the economy are not fully utilized; therefore, there is a welfare loss to the economy.

3. Negative GDP gap occurs when the actual GDP level is below the potential GPD level. It means the production level in the economy is less, especially in capital goods. It will also reduce the employment level and further affect the growth and development of the economy.

4. Unemployment in the economy will not only affect the standard of living of the people but will also affect the mental health of the person. Unemployment among the youth will lead to an increase in criminal activities.