Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies. Many economists have argued that unemployment increases with increased governmental regulation. For example, minimum wage laws raise the cost of some low-skill laborers above market equilibrium, resulting in increased unemployment as people who wish to work at the going rate cannot (as the new and higher enforced wage is now greater than the value of their labor). Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky. However, this argument overly simplifies the relationship between wage rates and unemployment,
Caused by: Demand pulled inflation is caused by monetary and real factors (the increase in money supply government spending and foreign exchange rates). Cost pushed inflation is caused by monopolistic groups of the society. 3. Output: Demand pulled inflation: the output raise until employment is fully achieved. Cost pushed inflation: the output fall down since the supply is reduced.
The impacts of income inequality on the US population are also different. Income inequality had an enormous impact on the United States’ history with the Great Depression that occurred in 1929. The principal impact of income inequality is surely the poverty rate that increases in the United States because a lot of the income goes to the richest population. As explain in this paper there are a variety of different technics to calculate the inequality within a country, some methods are more reliable than others. The most commonly used method is the Gini coefficient, which can help to compare the level on inequality between countries.
Cyclical unemployment is used to refer to the fluctuation in unemployment that is incurred by business cycles, more specifically, the unemployment caused by economic recessions. Its remedy is through following expansionary economic policies by encouraging investment, exports, and government expenditure, but on the other side this might not be effective in developing countries as it could lead to higher price levels, so it requires affecting the supply side -not the demand side only- by increasing production and productivity, leading to increase of income subsequently higher aggregate
The long term effect of the income equality can affect the economic growth of the country. This might also affect the education level and the lifespan of the people of the country. The income gap suppresses the economic growth as well as the job creation which makes the recovery of the country not so visible. The education level of the people of the country is also affected by the increase in the inequality of the income and this eventually affects the economic growth and the development of the country. The social life and the conditions of the people are also affected by the rise in the income inequality of the people of the country (Hargreaves,
.3.3 Inflation Rate The inflation rate used as an indicator in measuring the stability of economic condition for a particular country (Rashid et al., 2011). In financial theory, inflation rate reflected by consumer price index (CPI) represents all the price of goods and services will go up and it need to take more money to buy the same items. Moreover, high inflation is likely cause a great impact on economic activities of a particular country because it reduces the purchasing power of domestic consumers and it would lead to currency value decline. The previous researchers believe that the inflation rate will influence the stock market return. There are many empirical studies establish that the inflation rate has an impact on stock market
2. Classification of unemployment - By the source of unemployment: + Temporary unemployment: when there are some workers during job search or in better work- place, consistent with your desire. + Structural Unemployment: occur when there are imbalances between the supply and demand of the labor market (between the trades, regions…). This type is associated with the volatility of the economic structure and the ability to adjust the supply of the labor market. When this labor is strong-stretching, unemployment becomes severe and prolonged.
The degree of unemployment in a nation indicates the economic health of the country. Unemployment rate is used to measure the mess to take full advantages of labour resources because it signifies the percentage of labour force that is unemployed but are willing and actively seeking for work. Unemployment rate provides a precise measurement which was assured by The Bureau of Labour Statistics. However, there are several factors that affect the unemployment rate in a nation such as company downsizing, merger or acquisition, changes in technology and foreign competition, and job outsourcing to other nations. Long term unemployment creates a very large amount of cost for an individual and economy as a whole.
Factors effecting business cycle Employment At times of high unemployment, factories are underutilized, output is lowered and the economy can suffer to the point of recession. Conversely, low unemployment can result in higher productivity and an improved economy. Employment is just one variable, and its effect should be considered in conjunction with others. Roger Leroy Miller, author of “Economics Today,” reminds us that technological innovation can displace workers and increase unemployment, but it can also result in an increase in output. Inflation Inflation occurs when the average prices of goods and services rise.
Inflation is the pervasive and sustained rise in the aggregate level of prices measured by an index of the cost of various goods and services. Repetitive price increases erode the purchasing power of money and other financial assets with fixed values, creating serious economic distortions and uncertainty. Inflation results when actual economic pressures and anticipation of future developments cause the demand for goods and services to exceed the supply available at existing prices or when available output is restricted by faltering productivity and marketplace constraints. Sustained price increases were historically directly linked to wars, poor harvests, political upheavals, or other unique events. 2.2 TYPES OF INFLATION (1) Demand-Pull Inflation: