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Effect of unemployment
Effect of unemployment
Effect of unemployment
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Inflation and the Economy
WHY UNDER MONETARY FREEDOM INFLATION COULD BE STOPPED WITHOUT BRINGING ABOUT UNEMPLOYMENT
1. Unemployment and inflation do coexist and inflation causes much unemployment which would cease with it.
2. Excessively inflated prices would fall to market prices and so promote sales
and employment.
3. Less government spending would mean more private spending.
4. Prices and wages could be adjusted fast. If this is not done then this is not
the effect of stopping inflation!
5. Price adjustments through gold-value clearing could take place already during
a continuing paper money inflation - leaving no adjustment problem.
6. While FALLING prices do indeed deter from buying and promote unemployment,
FALLEN prices do the contrary. Under monetary freedom there would only be FALLEN prices.
7. The un- or under-used productive capital investment would, under monetary
freedom, be almost fully used and would thus ensure that there arises or remains
no unemployment.
8. Under monetary freedom there would also be no difficulty to mobilize fully
the real working capital of any country: the goods and services ready for retail
sale and to finance with them full employment - naturally at market wages and
prices.
9. Monetary freedom would allow all desired exchanges to take place and would
put Say's Law, that supply tends to create equivalent demand, into practice. No
sales difficulties or unemployment would result.
10.Unemployment is an unnatural condition: Under monetary freedom it would no
more occur than under barter.
TEN WAYS HOW, INDEED, WRONG ATTEMPTS TO STOP INFLATION COULD LEAD TO UNEMPLOYMENT - UNDER CONTINUED MONETARY DESPOTISM.
1. Stopping the note ...
... middle of paper ...
...s of the free banking literature.
17. A critique of the note issue monopoly.
Sorry, but 15-17 are not yet out, either. On the other hand, LMP has fiched
hundreds of monetary freedom titles, including a 124pp free banking
bibliography.
A handbook on monetary freedom and one dealing especially with cause and cure
for unemployment are still in the works by February 1999.
John Zube, 11. 2. 1999.
Note: I merely scanned this text in and afterward somewhat corrected the
scanning and did minor editing. The scanning may still have left some mistakes I
did not notice, apart from my own and usual ones. The Word 97 program sometimes
insists upon its own layout and stubbornly resists my correction attempts.
Somewhat corrected and edited on 26.6.1999 & 2.7.99.
Bibliography:
Go back to: lmphomepage.htm.htm
Go forward to: app23-lt.htm.htm
First, I will discuss the time period between 1973-1974. Because the unemployment and inflation rates are higher than normal, we can assume that the aggregate-demand curve is downward-sloping. When the aggregate-demand curve is downward-sloping, we know that the economy’s demand has slowed down. When the economy’s demand has slowed down, businesses have to choice but to raise prices and lay off workers in order to preserve profits. When employers throughout the country respond to their decrease in demand the same way, unemployment increases.
The trends in unemployment affect three important macroeconomics variables: 1) gross domestic product (GDP), 2) unemployment rate, and 3) the inflation rate.
Empirical literature examining the determinants of inflation has mostly viewed it as a monetary phenomenon. This viewpoint basically stems from Milton Friedman’s famous dictum that inflation is always and everywhere a monetary phenomenon. However, the conjecture of Friedman has recently come under attack. In fact, there appears to be virtually no correlation between money growth and inflation since the early 1980s. This leads to evolution of the argument known as Fiscal Theory of Price Level (FTPL). To capture the nonmonetary aspects of inflation, a number of economists investigate the main political, institutional and economic determinants of inflation across countries and over time. For instance, Aisen and Veiga (2006) conclude that political instability leads to higher inflation. Their study reveals that an additional government crises and a cabinet change which are used as proxy for measuring political instability raise inflation rate by 16.1% and 9.1% respectively. In another study, Aisen and Veiga (2008) extend their work to further analyze the effect of political instability, social polarization and the quality of institutions on inflation volatility. They argue that politically unstable and socially polarized countries with weak institutions are more exposed to political shocks that result in discontinuous monetary and fiscal policies which in turn result in higher inflation volatility. The intuition is that rising inflation instability creates frictions on market which reduces economic efficiency and causes the prevailing price in the economy to deviate from the price which would otherwise have been determined in presence of stable price level. They also provide evidence that greater independence of the Central Bank leads...
...g on the changes of cost of living to prevent there becoming a wage floor.
B. Raising the minimum wage will provide a needed boost to the American economy and in the long run be good for business.
In this chapter, the authors evaluate the power of central banks during normal and tough times and question whether central banks ‘have the power to control something as huge as the macroeconomics’ (p.74). ‘Why Are There People Who Cannot Find a Job?’ is the question Akerlof and Shiller wish to tackle in chapter eight. In this chapter, they focus on the idea of fairness in their theory of Animal Spirits, then conclude that low wages, which workers consider unfair, will reduce their productivity. In chapter nine ‘Why is there an employment/inflation trade-off?’
There is perhaps no other political issue in our contemporary society that is more pertinent, pervasive, and encompassing than a nation’s economy. From the first coins used in Greece and the Asia Minor in the 7th century BCE, to the earliest uses of paper money, history has proven time and time again that the control of a region’s economy is absolutely crucial to maintaining social stability and prosperity. Yet, for over a century scholars have continued to speculate why the United States, one of the world’s strongest and most influential countries, has one of the most unstable economies. Although the causes of this economic instability can be attributed to multiple factors, nearly all economists agree that they have a common ancestor: the Federal Reserve Bank – the official central bank of the United States. Throughout the course of this paper, I will attempt to determine whether or not there is a causal relationship between the Federal Reserve Bank’s monetary policies and the decline of the U.S. economy. I will do this through a brief analysis of the history and role of this institution, in addition to the central banking system in general. In turn, I will argue that the reckless and intentional manipulation of the economy by the Federal Reserve Bank, through inflation and the abolishment of the gold standard, has led to the current economic crisis in the United States.
This article by Andrew McCathie posted in EarthTimes and titled “European inflation climbs unemployment at 12-year high was posted on Friday July 30 2010. The article reports that food and energy costs have played a critical role in driving up inflation in the 16-member eurozone. The rates of unemployment remained stagnant to its highest level during this time.
Inflation is one of the main reasons for the minimum wage being at a low level. In the United States workers are earning less than they did in the seventies. Last year in the United States approximately three million people of the working class dropped below the national poverty level. Minimum wage laws are established by the federal and state governments to help balance out the amounts of money people earn. It prevents one person or persons from making all the money, and some making very little. The term income distribution is where everyone would earn the same amount of money. This is not something that could really happen because everyone has different levels of education and different trades. Minimum wage is a way to try to keep the income distribution fairly equal. The views on raising the minimum wage are very different from person to person.
There is a close relationship between Gross Domestic Product (GDP) and the unemployment rate as it will relate to the decrease or increase of inflation rate. The inflation rate will increase when GDP and unemployment decreases, because it will affect the purchasing power of the people of a particular country.
Unemployment is a macroeconomic factor that is pertinent to an extensive economy at a regional level. Therefore it affects a large population rather than a few select individuals. Unemployment does not only have social costs, but economic costs too. The ILO, International Labour organization, defines unemployment as, ''People of working age, who are without work, but available for work and actively seeking employment.'' Therefore implying that it is a state of an individual looking for a job but not having one. Unemployment is one of the key indicators in determining the economic stability of a country; hence governments, businesses and consumers closely monitor it. There are numerous aspects that might lead to unemployment such as labour market conflicts and recessions in the economy. There are two main types of unemployment, which can be focused on, seasonal and cyclical unemployment. Seasonal unemployment occurs when a person is unemployed or their profession is not in demand during a particular season. On the contrary, cyclical unemployment occurs when there is less demand for goods and services in the market so consequently supply needs to be decreased.
Inflation and unemployment are two key elements when evaluating a whole economy and it is also easy to get those figures from National Bureau of Statistics when you want to evaluate it. However, the relationship between them is a controversial topic, which has been debated by economists for decades. From some famous economists such as Paul Samuelson, Milton Freidman etc to some infamous economists, this topic received a lot of attention. However, it is this debate that makes the thinking about it evolve. In this essay, the controversial topic will be discussed by viewing different economists’ opinions on that according to time sequencing. But before started, it is worthy getting a better understanding of the terms, inflation and unemployment.
Inflation is defined as an increase in the expected price level and has been the signal for an improving economy, but it has also weakened an economy due to the unemployment it usually produces which usually hurts the Middle class the most. A healthy rate of inflation means an expanding economy due to higher tax revenues for the government and higher wages for businesses that are booming due to the high demand of their products. But if inflation surpasses of what is expected than employer will have to reduce wages to meet these new prices. When the Federal Reserve creates inflation most argue that this is robbing people of the money that they have saved because they have to use it due to the rise in prices. Printing
It is difficult for government to achieve all the macroeconomics objectives at the same time. Conflicts between macroeconomics objectives means a policy irritating aggregate demand may reduce unemployment in the short term but launch a period of higher inflation and exacerbate the current account of the balance of payments which can also dividend into main objectives and additional objectives (N. T. Macdonald,
Inflation is one of the most important economic issues in the world. It can be defined as the price of goods and services rising over monthly or yearly. Inflation leads to a decline in the value of money, it means that we cannot buy something at a price that same as before. This situation will increase our cost of living.