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Classical unemployment
 

 

Unemployment caused by wages being too high relative to productivity so that the firms in an economy cannot profitably employ all the labour on offer at these real wages. This type of unemployment can be reduced by a policy aimed at reducing the real wage rate, e.g. tax policies, or by improving productivity, e.g. through education and training.

 

Reference: Oxford Press Dictonary of Economics, 5th edt.