Group 4

Overall health of economy

One of the major problems of
macroeconomic is economic growth and
unemployment

Other problems are inflation and business
cycle



A situation where workers who are capable
of working and willing to work do not get
employment.
Worker move from one job to another

Result of an imperfect information in labor
market
When the qualification of a person is not enough
to meet his job responsibilities

As a result he/she needs training

When occupation is not in demand at
certain seasons
It occurs when the economy is in
recession. As a result demand for labor
decreases


Classical Vs Keynesian

One says that Individual are responsible for
there own employment or unemployment

Others says that society owns person a job,
equivalent to individual training or past
experience

India typically follows Classical theory
High population growth

Absence of employment opportunities

Seasonal unemployment

Increasing turn out of student from
Universities

Insufficient rate of economic growth

Individual level

Society/Social

Economic cost
Unable to earn money to meet his financial
needs

Unemployment increases chances of
malnutrition, illness and mental stress

Owners will have less income and will
have lower living standard.

Economy with high unemployment is not
using all of its resources

Less output is produced, thus economy is
less able to address scarcity problem

Crime rate rises, frustration factor and in
some case families fall apart

Unemployment rate = (Unemployed
workforce/Total labor workforce) *100
Potential GDP : Is the capacity of the
economy assuming natural rate of
unemployment

Actual GDP : Capacity of economy when
unemployment is greater(negative GDP gap)
or less(positive GDP gap) than natural rate of
unemployment

GDP Gap = difference between above two
GDP gap is the amount by which actual
GDP falls short of potential GDP.

Aurther Okuns : For every 1%
unemployment exceeds the natural rate of
unemployment GDP gap of 2% occurs
Regression and Correlation