If the umemployment rate increases, the economy can be greatly affected. The government and the nation suffer. In many countries the government has to pay the unemployed some benefits. The greater the number of the unemployed or the longer they are without work the more money the government has to give out.Therefore, the nation not only has to deal with the lost income and decreased production but also with additional cost.
Another negative effect on the economy would be the change in spending money. The spending power of an unemployed person and their family decreases drastically and they would rather save than spend their money, which in turn affects the economy greatly.
Increased taxes and the insecurity about their own work may affect the spending power of the working people as well. They too may start to spend less than before which negatively affects the economy and also society.
This negative affect on the economy can lead to a dangerous cycle called the recession. With the increase rates of unemployment other economy factors are significantly affected, such as: the income per person, health costs, quality of health-care, standard of leaving and poverty. Unemployment could cause a downward spiral of money not being spent or recieved and result in a critical place for the economy.
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