TUTORIAL CH : Unemployment and Inflation

1) Explain 5 types of Unemployment with examples.

Firstly, we have frictional unemployment. When employees change jobs and become
unemployed while looking for a new career, this is referred to as frictional
unemployment. A worker may have a job lined up, but they may not be able to begin
work for several months. If they are unemployed for a few months, it is basically the
consequence of one career ending and another starting. It is not a condition of long-
term unemployment. There is a narrow unemployment gap between being employed
and being unemployed. As a result, there will be some tension as the unemployed
worker must modify his financial problems while experiencing frictional unemployment.

Secondly, we have cyclical unemployment. When irregular economic cycles cause

unemployment, this is referred to as cyclical. It is not always possible, to estimate but
economies do experience uncertainties. When the economy slows and there isn't much
employment, and there aren't as many goods being bought, and consumers aren't
spending as much, the economy is on the path of entering an economic drop. When the
economy begins to improve and people begin to purchase more goods, and everyone is
willing to produce more goods and employ more workers, this is referred to as an
expansion. There are expansionary and deflationary periods. During these normal
economic cycles, a recession would result in job losses.

Thirdly, we have structural unemployment. As economic changes decrease the need for
jobs, this is referred to as structural unemployment. If the economy isn't doing well,
companies won't need as many jobs. If it improves, they'll need more, and the
unemployed will be able to continuously work, which reduces the unemployment rate.
If the economy shifts in a downward direction, there would be a decreased demand for
jobs. Assume that people aren't purchasing as much of a good or service. Any company
who releases the product would be unable to hire as many people because the product
would not need as many people to design and build, distribute, or sell. Unless the
company has increased its profit from revenue, it will be unable to hire more
unemployed workers. Structural unemployment is simply the result of economic
changes.

Lastly, we have seasonal unemployment. When seasonal cycles decrease the demand
for such jobs, this is referred to as seasonal unemployment. For example, Seasonal
workers may be those who work in a farming or ranching environment. There are
certain times of the year when you will harvest, certain times of the year when you will
 plant, and certain times of the year when you will wait for things to happen. There are
certain situations that only appear at certain times of the year. Certain positions are
only available at certain times of the year or during certain seasons. Seasonal cycles can
reduce the need for some jobs at different times of the year. It works differently from
cyclical unemployment, which is focused on the irregular business market and economic
cycles.

2)

Ans : Unemployment rate = (total unemployed/labour force) x 100%

Year 2000 = (11649.2/ 6834.1) x 100%
= 1.7%
Year 2001 = (11878.9/7046.5) x 100%
= 168.6%

b. Explain the effect of unemployment to the individual, society and economic.

Firstly, the effect of unemployment to the individuals. Unemployed people are prone to various
of difficulties. These difficulties become more extreme the longer an individual is out of work. A
person can experience negative effects of unemployment include decreased salaries, health
issues, negative family impacts, and mental health conditions. Secondly, the effect of
unemployment to the society. Unemployment has an impact on the community and
environment in which the unemployed person lives. While a single unemployed person does
not usually have a major effect on society, high unemployment rates in some areas often
contribute to higher poverty rates and poorer communities, highlighting the social impact of
unemployment. Communities with high unemployment rates are more likely to have
insufficient job opportunities, poor living conditions, less entertainment opportunities, limited
access to public transit and public services, and bad education. Finally, the impact of
unemployment on the economy is a reduction in consumer demand, rising inflation or
deflation, unwillingness among entrepreneurs to invest, increased government spending on
social services, lower tax revenues, a higher taxation burden on community, increased social
issues, and decreased demand for imports.

3) Explain how government use fiscal policy to overcome Inflation problem.

The government will use fiscal policy to overcome inflation problem by increasing the
tax revenue for all types of community resulting in a decrease in real disposable income
and the government will also decrease the government expenditure. As a result,
demand and production could be lower, which could have a short-term negative impact
on employment and real economic growth.

4) Explain causes of Inflation.

Inflation is caused by two factors, demand-pull and cost-push. Both are mainly taken
responsibility for a general increase in prices in an economy. They do, however, work
differently. When consumer demand pulls prices up, this is referred to as a demand-pull
condition. When supply costs increase prices, this is referred to as cost-push. Demand-
pull Inflation is the most common cause of rising rates. It happens when market demand
for products and services exceeds supply. Producers are unable to keep up with
demand. They may not have enough time to develop the necessary manufacturing to
increase supply. They do not have enough professional employees. If so, raw materials
could be in short supply. The second source of inflation is cost-push inflation. It happens
only when there is a supply shortage combined with sufficient demand to enable the
producer to increase prices.