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 from 2013 to 2015 likely impacted the circular flow of income in several ways:

1. Effect on Consumption: As unemployment decreases, disposable income for households increases, leading to an increase in consumption. This injection of spending boosts demand for goods and services from firms.

2. Investment Increase: With rising consumption, firms may be encouraged to invest more in production capabilities to meet the higher demand. This also contributes positively to the circular flow.

3. Impact on Imports: An increase in household income may lead to higher spending on imports, which represents a withdrawal from the circular flow, offsetting some of the benefits of increased consumption.

4. Household-Firm Dynamics: As firms generate higher revenues from increased consumption, they can afford to hire more employees, further enhancing the income levels within households, thereby perpetuating the cycle of income flow.

In summary, while reducing unemployment injects more income into the economy, it also creates a complicated web of interactions between households and firms that influence the circular flow.