The chart below shows the UK unemployment rate, seasonally adjusted, from 2008 to 2015 (Source: http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2015/statistical-bulletin.html#tab-8--Unemployment) (a) Which one of the following types of unemployment best explains the change in the data between 2008 and 2010? A Cyclical B Frictional C Seasonal D Voluntary (b) Explain the likely effects on the circular flow of income of the change in unemployment between 2013 and 2015. - Edexcel - A-Level Economics A - Question 1 - 2017 - Paper 2

The change in unemployment between 2013 and 2015 likely led to a reduction in overall income circulating within the economy. As unemployment fell, more households had income, which resulted in increased consumption of goods and services. This could be diagrammed in the circular flow of income as follows:

1. Increased Consumption: More unemployed individuals moving into employment means higher disposable income, resulting in increased consumption spending.

2. Investment by Firms: With rising demand for goods and services, firms may increase their investment in production capabilities.

3. Effect on Government Revenue: Increased employment typically leads to higher tax revenues for the government, which could be injected back into the economy through government spending.

4. Potential Import Increase: However, as households increase their consumption, this may also lead to greater spending on imports, which can represent a leakage in the circular flow.

Overall, the interdependence between households and firms enhances the flow of income, as shown in the diagram representing the circular flow model.