Explain what is meant by the full employment level of National Income
and Equilibrium level of National Income. Why might these levels of
income be different?
National Income is the level of total output, expenditure or income of
an economy over a period of time. The main measure of NY used around
the world today is Gross Domestic Product, or GDP. This is a measure
of all domestic production, that is, production not including trade,
which takes into account the value of indirect taxes such as GST. Full
employment level of National Income means the level of total output
attained when unemployment is at a socially acceptable level. In most
cases this is around 5%, however it does tend to vary. If a government
sets a target unemployment level and this is reached, the economy is
said to be operating at full employment (Nf). Full employment also
includes something called the natural rate of unemployment, which
includes seasonal and frictional unemployment, as well as those
individuals who do not wish to be employed. In other words, the
natural rate of unemployment is the proportion of the workforce which
voluntarily remain unemployed whilst the labour market is in
equilibrium.
We can see, therefore, that full employment may include some
unemployment, although it is usually a small percentage of the working
population. Equilibrium level of employment, however, may have a
larger level of unemployment. The diagram below represents a situation
in which the full employment level is illustrated.
National Income $100b
This diagram presents a situation where the SRAS and the AD curve
intersect on the LRAS and $100b is the NY. The terms used in the
diagram must be explained. SRAS stands for short run aggregate supply,
which is the relationship between the aggregate supply of all final
goods and services and the price level, holding all else constant. In
the short run, the prices of final goods and services can change, but
the factor prices do not. Because of this, it is not possible to
generalise the time period referred to by the word short, as factor
prices can change at any time for numerous reasons. The SRAS is upward
sloping because of the law of diminishing returns, that is some inputs
can increase whilst others may not, and the fact that resource
bottlenecks may occur when the economy moves towards Nf.
AD stands for aggregate demand,, which is the sum of all planned
spending in an economy. The slope of the AD curve is due to the income
effect and the substitute effect. AD is calculated by Consumption +
Investment + Government spending + (Exports – Imports), or
Reilly, Lucas. "By the Numbers: How Americans Spend Their Money." Mental Floss. N.p., 17 July 2012. Web. 04 Feb. 2014.
Since various members of society are affected by this negative externality, this next graph displays the surplus between the Equilibrium conditions and the optimum conditions.
Ibid: 114 – “In developed capitalist economies, private consumption spending accounts for half or more of GDP;314
Stratmann, Thomas, and Gabriel Okolski. "Does Government Spending Affect Economic Growth? | Mercatus." Mercatus. 10 June 10. Web. 20 Nov. 2011. .
In my short life, I’ve worked two minimum wage paying jobs. My first job was as a fry cook at Chick Fil-a when I was 16, and my second and current job is at Sports Authority. Minimum Wage is defined as “the lowest amount employers can their employees for each hour of work.” As minimum wage paying jobs, they were looked at, in my case anyways, as a way to have some extra pocket change and gas money. And that is the way most Americans view jobs such as fast food: as a place for teenagers to make money throughout high school and college and maybe even learn the value of a dollar.
In the graph, it shows the law of demand; as the price increase there is a decrease in the quan...
On the 1st of April 1999, the National Minimum Wage (NMW) was introduced in the UK at a rate of £3.60 per hour for workers aged 21 and older, and at a rate of £3.00 for workers aged 18-21. Since then, it has grown steadily to reach a rate of £6.31 per hour today. The NMW is “the minimum pay per hour that almost all workers are entitled to by law” (www.gov.uk). In 1999, 1.9 million people were paid less than £3.60, sometimes even below the Living Wage due to the dismantling of unions by the Thatcher government. The idea of a minimum wage then came up, supported by the Labour Party, in order to reduce the increasing poverty and to prevent low wages workers from being exploited by their employers. The Conservative Party, supported by employers, was strongly opposed to this project, arguing that a minimum wage will damage the economy and create poverty due to higher unemployment levels. So, how does the NMW really affect poverty and employment in the UK?
In the following report we have first tried to clear the concept of the multiplier then carried on with explaining various theoretical aspect of tax multiplier, government spending multiplier and planned investment multiplier. Then we have tried to compare the change in expenditure and change in GDP in Indian economy by providing data which was extracted through a secondary source.
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the amount of goods that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, level of income, personal tastes, the population, government policies, the price of substitute goods, and the price of complementary goods.
One factor is the increase of income rate. As the diagram shows below, it results the demand curve shift from D to D1. When people get more income, more money will be available for them to spend. Since the purchase power of customers improves, the demand of them increases as well. Make luxury handbags as the example. If a woman earns five hundred pounds per month, she may not be willing to buy a handbag in expensive price because she need to keep life going. But if this woman gets a higher salary of one thousand pounds or even more per month, or she wins a lottery in big amounts, she will be more willing to buy a luxury handbag. Thus the demand of luxury handbags will increase. As the movement of demand curve a shortage will occur. A new equilibrium will appear until the price moves from P to P1. And the quantity will rise from Q to
In an economy, aggregate demand (AD) accounts for the total expenditure on goods and services. It has five constituents; Consumer expenditure (C), Investment expenditure (I), Government expenditure (G), Export expenditure (X) and import expenditure (M), This gives us: AD= C+I+G+X-M. Aggregate supply (AS) on the other hand is the total supply of goods and services in the economy. Increasing AD and decreasing AS both cause demand-pull and cost-push inflation respectively. Demand pull inflation occurs when aggregate demand (AD) continuously rises, detailed in Figure 1. The AD curve continuously shifts to the right, as demand continuously increases, from point a to b to c. This consequently causes an increase in the price level of goods and services. As prices rise, costs of production also increase, causing producers to reduce output (a decrease in aggregate supply (AS)), shifting the AS curve to the left and leading to yet another increase in prices, (t...
When it comes to contract negotiations, labor unions may differ from one and another throughout the different industries, but they usually share the same goals when it involves contract negotiations (Sloane & Witney, 2010). During these procedures, demands are usually made by from both parties, the employer and the union; this processes main goal is to negotiate a written agreement between each other covering a multitude of issues and concerns (Sloane & Witney, 2010). These talks are typically the most confrontational part of the relationship between labor unions and management, especially when it comes to wage issues (Mayhew, n.d.). This author will take a look the wages and wage-related issues, employee benefits, institutional issues, administrative clauses, and make recommendation that will would prevent wage-related grievances from happening.
National income is a measure of the value of the output of the good and
Unfortunately, there are many Americans out of work in today’s current declining economy. Unemployment can be defined as a person who is out of work involuntary, not by choice. These people are looking jobs and available to start work. Being unemployed can be disheartening and deciding what the next step is can be challenging. Underemployed can be described as being inadequately employed, such as a low-paying job that requires fewer skills than one possess. (Daly, Hobijn, and Kwok 2015) Making ends meet can be difficult for one who has been affected by this economy over the past few years. America still has a high unemployment rate since the decline of the current job market. And many Americans are struggling to establish the skills needed for employment, or the underemployed are force to lower they skill to make a profit. America’s economic status has force the underemployed and unemployed to make ends meet with the current jobs available. And last but not least some have also utilized these difficult times to venture into new discoveries to make life hassle free. So, we wonder is Americans giving up in today’s economy or do they settle for lower end job to establish a steady income to make ends.
Over the last several years, Ireland has experienced a dramatic change in employment. A quick study of the latest CSO “Employment and Unemployment” survey shows where jobs have been lost and gained, by sector of employment. Some sectors have seen job losses in the hundreds of thousands while other sectors have been slowly growing. The period from April 2007 to April 2013, there has been a loss of 266,000 jobs (CSO, 2013). The study suggests that the loss of jobs was greatest in the Construction and Industry sectors. While gains occurred in the Education, Information and Communications, and Human Health and Social Work sectors. These changes show that the tasks associated with low, skill and education are on the decline. The jobs that need a higher education level are on the rise (National Skills Bulletin, 2013, 28). Due to this trend, subsidies in the Education sector should be increased to train and better equip the workforce. It would be of a great benefit to the entire economy, as an increase in education may attract more business to Ireland. It would also make the workforce more adaptable to change, giving people stability in their lives.