According to the BBC, unemployment rates are at their lowest since the beginning of the recession in 2008.However how would such feat influence the economy in the long run and what other issues it may have caused, as far as the other three macroeconomic policies are concerned, is the real question. In order to answer such question with as much detail as it is required for one to understand how the economy is affected, it is required to elaborate on what each macroeconomic policy contains and how it is related to the other three macroeconomic policies. The four objectives of the macroeconomic policy are high and stable economic growth, low unemployment, low inflation and the avoidance of balance of payments deficits and excessive exchange rates …show more content…
In order to accomplish this, it is crucial for a stable growth to be maintained, which therefore does not encourage short-term economic growth that cannot be sustained. As far as unemployment is concerned, its reduction is another major macroeconomic objective, as the unemployment benefits are draining the government revenues, but also represents a waste of human resources. (Sloman, Wride, 2009: 388) Another issue that affects the macro economy is inflation. This term signifies the rise in prices throughout the economy. The inflation rate is the measure of the annualized percentage change in a general price index, over time.( Mankiw 2002: 22–32) A high inflation rate will influence negatively the process of economic decision making and will result in businesses being more hesitant when it comes to investment decisions and wage/price rates. Last but not least, is the balance of payments and the exchange rate and the primary goal of the government is to avoid
In conclusion, the current macroeconomic situation in the United States is characterized by moderate growth because of better economic conditions that were brought by the events of 2013. The country has experienced moderate economic growth since the 2008 global recession but has shown real signs of momentum. While the country is not concerned about recession or inflation, the rate of unemployment is still a major challenge despite improved consumer and business confidence. As a result, the Federal Open Market Committee or Federal Reserve System needs to adopt fiscal and monetary policy initiatives that help address the unemployment issue and promote high economic growth.
The trends in unemployment affect three important macroeconomics variables: 1) gross domestic product (GDP), 2) unemployment rate, and 3) the inflation rate.
-1.25%, which means that output was falling. When in recession, unemployment increases because household incomes, business profits and GDP decrease, so unemployment is increased because of the global recession. Since household income decreases, their spending decreases, which means firms will earn less profit. Budget cuts will then need to be made so people are made redundant as less workers are needed to produce less. Making people redundant is a big way of cutting costs, so unemployment increases because people lose their jobs. This worsens the recession, as household spending will decrease even more because of people being made redundant, so firms will be receiving less
The United States’ economy has slowly been recovering since the Great Recession ended in 2009. The country’s gross domestic product has increased steadily since the end of the recession (1). The consumer price index has slowly increased as well (2). The civilian unemployment rate has decreased significantly from its peak of 10.0% in October of 2009 (3). It has not decreased smoothly; rather, there were many small spikes caused by several short increases in unemployment each year (3).
Nowadays, keeping the inflation and unemployment as low as possible are the two most important goals of the government as well as the Fed. Also, at the same time, the government and the Federal Reserve have to ensure that the country’s GDP increases at average of 3%. This can be achieved through the use of the fiscal and monetary policy. When used in the right manner or mix, these policies can stimulate the economy and slow it down when it heats up. The logic of this can be depicted by the Phillips curve that shows that expansion of wages in growing economies tends to more rapid than normal for a given period of time. A permanent balance between employment and inflation that often results in long-term prosperity can only be realized through implementation of the right policies.
“Macroeconomic indicators include economy-wide phenomena such as unemployment rates, national income, rates of growth, gross domestic product, inflation, and price levels” (Page & Stevens, 2005).
Macroeconomic factors like inflation and unemployment are considered as a top-down approach that portrays the bigger picture of the functioning of the whole economy. In every region, it is the macroeconomic factors that determine the manner of operation of the economy with stability in these factors indicating economic stability and an unstable condition of the factors equally leading to poor performance of the overall economy. The paper examines how inflation and unemployment affected businesses in the UK in 2014.
Unemployment refers to a situation to which where individuals are unable to find a job but are actively seeking employment. Unemployment is a major cost to an economy, because it results in the opportunity cost of lost production, as well as increased social welfare payments and a loss of taxation revenue. It also restricts domestic output and growth and has many detrimental social costs which include a loss of skills and family household tensions. In recent years sustained economic growth has been the best way to achieve a lasting fall in unemployment. When economic growth is strong, there is usually an increase in aggregate demand (AD) which means there are more employment opportunities and more resources will be needed to cope with the demand. The annual Federal Budget for 2010-11 just recently forecasted economic growth of 2% this financial year showing that Australia has well truly escaped the GFC. Consequently, unemployment is also expected to fall to 4.75% in 2011-12 from a current figure of 5.3% for the March quarter this year. Australia has been able to keep unemployment at a relatively low rate of 5-6% which is significantly lower than the OECD 's average. The RBA is also predicting growth rates between 3.25% and 3.5% in both 2010 and 2011. According to Okun 's law, unemployment will fall if the economic growth rate is greater than increases in population of the labor force and productivity growth (Trading
Government policy environment – a desire to reduce unemployment and make the economy attractive to inward investment as a source of employment and long-term growth
Today, our nation is in a recession. Nobody can deny that. No politician, no Wall Street financier, no journalist, can say otherwise. The discrepancies lie with the principle method of economic response to this crisis. Some politicians point out the unemployment rate and call down the powers of Congress to decrease it. Others still look to the devious inflation percentage that lurks behind, as a shadow, ready to cut purchasing power and increase prices. Unfortunately, as the Phillips curve warns us, the two are irreconcilable. Lower inflation invites higher unemployment, and increasing employment beckons heightened prices. The discrepancies lie with the classic battle between controlling inflation and unemployment. Though it may be the less popular choice, politicians should concentrate on curbing inflation as it has a great impact on our economy and is a more accurate indicator of economic stability.
Difficulties in Formulating Macroeconomic Policy Policy makers try to influence the behaviour of broad economic aggregates in order to improve the performance of the economy. The main macroeconomic objectives of policy are: a high and relatively stable level of employment; a stable general price level; a growing level of real income (economic growth); balance of payments equilibrium, and certain distributional aims. This essay will go through what these difficulties are and examine how these difficulties affect the policy maker when they attempt to formulate macroeconomic policy. It is difficult to provide a single decisive factor for policy evaluation as a change in political and/or economic circumstances may result in declared objectives being changed or reversed. Economists can give advice on the feasibility and desirability of policies designed to attain the ultimate targets, however, the ultimate responsibility lies with the policy maker.
Main components of macroeconomics are Inflation and unemployment. Inflation is the falling the power of purchasing and raising the production cost of production. When the people who have no job and they are searching for job then Unemployment happens. Additionally, inflation and unemployment have a relationship with negative. All the component of macroeconomics are interconnecting and while examining one must concern each and every component with equal concern. In the case of UAE economy, inflation is increased when we compared with that past. If we analyse the economic condition of our country it is clear that inflation is higher in recent years comparing with past decade. Simultaneously, with inflation, the rate of unemployment is
In a recap, the three policies introduced, the Unemployment Reformation Act of 2059, the Infinite Education Opportunities Program Act, and the Unity Tax, will be a vital part in restoring and surpassing expectations for decreasing the percentage of Americans unemployed by ten to fifteen percent within the next six to eight months. I believe that with these policies the chances of a recession will not occur for a long period of time. For that matter, a recession may not occur again depending on how successful the unemployment plans develop. Nevertheless, I predict that by the year 2109 the employment rate for Americans will reach eighty-three to eighty-five percent.
One of the most prevailing issues that surrounds our society and the industrial sector is the continuous rise in unemployment. The assessment of the poor performance of an economy affects the rise in unemployment rates which is assessed through the prevalence of unemployment and the percentage of the overall unemployed labor force and those who are still in the process of looking for work. According to Bassanini (2007), Duval (2007) and Ernst (2011) some of the factors and determinants that influences the rates on unemployment are the policies on minimum wages, increased tax burden and labor demand. The supply and demand side policies complement each other regarding unemployment because of the leniency and the if labor supply would increase
Lower GDP for the economy also one of the consequences of unemployment in current time. High rate of this issue implies the economy is operating below full capacity and inefficient so that it will lead to lower output and incomes. Because people who are searching for their work usually will spend less in purchasing goods and