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Low Level Of Unemployment Essay

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A low level of unemployment is one of the main macroeconomic goals of every country. This is because a low unemployment rate is a sign of improved health of an economy. Unemployment (or joblessness) is defined as people of working age who are without work, available for work and actively seeking employment . Unemployment rate is the number of people who are unemployed expressed as a percentage of the total labour force . Statistically, the number of unemployed people in 18-member Eurozone drop for about 22, 000 in March when compared to February. The drop is greater, which is about 316,000 when compared to the value in the year before. A slight decrease in the number of unemployed people gives a big impact to the economy …show more content…

The average real wage will fall from W2 to W1 if the labour markets functioned perfectly. However, the wages are ‘sticky downwards’. This means that while workers’ wages can easily increase, it is less likely that real wages will fall. Paying lower wage will lead to discontent and reduced motivation among workers and may results in lower worker productivity and undesirable. Since wages are likely to remain ‘stuck’ up at W2, the aggregate supply labour will be greater than aggregate demand for labour and unemployment a-b will be created. There is solution for demand deficient unemployment. The government can intervene to bring about an increase in aggregate demand through the use of fiscal or monetary policies. Government can use expansionary fiscal policy by increasing government spending or lowering taxes to increase the consumption by household and investment by firms, thus increasing the aggregate demand to solve this unemployment. However, there is no guarantee that people will spend their extra disposable income. If consumer confidence is low then people might prefer to save the income and aggregate demand might remain

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