Login with Facebook

Economy Analysis: Inflation, Unemployment And Policies

The economy is one of the most critical aspects of national growth and development. And in this case, inflation and unemployment are the two most used economic indicators for the health of a country. Hence, they have to be carefully measured and kept under control. And this is keeping down unemployment cases and encouraging economic sustainability is one of the vital, if not, only, concerns for governments. It has been so since the beginning of economic science, leading to the theorization of different economic policies and doctrines. This has consequently resulted in varying literature on these critical subjects.

In this article, we are going to look at the economic effects of inflation and unemployment in a country. In addition, we shall be considering some of the approaches that governments apply to resolve these issues, including fiscal and monetary laws.

Economic Growth And Development

Many people use the terms of economic growth and economic development interchangeably. They seem similar, even in application, but they have a slight difference in their meanings. Economic growth is the long term, a consistent increase in a country’s income or output. In other words, economic growth deals with an increase in the flow of goods and services over a long period. It is, therefore, long-term growth in income. This happens when: there is a substantial increase in the production of goods and services, where prices remain constant, a type of growth known as real growth/real national income; there is an increase in prices of products and service with production remaining constant, a type of growth called nominal growth/income.

In economic analysis, actual growth and potential growth are two terms used to define growth. Actual growth is achieved or realized growth, where potential growth is expected or achievable increase, which can be realized in the future.

Economic development, on the other hand, is a broader concept. Whereas economic growth is the increase per capita, economic development includes economic growth plus social welfare. In other words, it is economic prosperity that does not focus on goods and services alone, but also the benefits of production to society. It includes economic welfare, where there is social justice leading to the decrease of the gap between the ‘haves’ and ‘have nots.’ Therefore, economic development is a process that carries an increase in per capita income, along with a decrease in social prejudice, poverty, illiteracy, and economy. Economic development ensures there is proper distribution of goods and services produced within a larger section of society.

Economic growth is calculated by the analysis of the growth of domestic products at factor cost (GDP) with the inclusion of some structural changes in the economy. These are the two factors that determine economic growth, where structural changes are often understood as economic development. Structural change is important in society as it involved a change from the dominance of the primary sector to that of secondary and tertiary industries. There is also technological change, which is the shift from labor focused on capital-focused technology. And a change of land ownership from absentee landlords to the actual user of the land is an instance of institutional change in terms of the economic development process.

Factors determining economic growth

Four critical factors determine economic growth; they include:

- Growth of the labor force

When a country invests heavily in offering the best labor laws, it initiates the creation of qualified personnel in every industry. This means they have proper labor training to handle even the most technical jobs. And this happens when there are good training institutions and schools. Practical knowledge leads to better human resources.

- Investment in human capital

Even though technology has to lead to more use of machines than people, social capital is still an essential aspect of modern economies. It is therefore important that we get well-trained persons in health, education, and training on the job. This means economic growth is determined by having experts who understand what to do in specific situations.

- Investment in physical capital

Since the agricultural revolution, through the industrial revolution and now the information era, nations have relied on physical capital as an indicator of economic growth. These include things like factories, machines, transport, and communication facilities.

- Technological change

The modern world relies on technological advancement. Over the years, different technologies have come up to help human beings lead a better life. And today, governments are investing more in technology for better dissemination of information and dissemination. Technology is, without a doubt, the future of development, and only those who can embrace it will have an easy time.

The determining of the economy above can be summarized and an equation, as shown below:

        GDP = f(L, K, H)

In this case, GDP is a gross domestic product, f is function showing the link between input and output. L stands for the labor force, K for physical capital, and H for human capital. We can consider this an aggregate function because it relates the total out of an economy to the sum of the three main factors involved in output production.

Unemployment and Inflation

Unemployment and inflation are considered the biggest threats to economic growth and development. Economic growth is defined in terms of national income, which comes when people are working and are able to pay taxes. Investment increases national income, which tends to reduce unemployment.

Inflation

Inflation is persistent in the rise of general level prices. It is represented as the rate per cent per unit time. There are three major categories of inflation.

- Demand-pull inflation

This type happens when aggregate demand has been increasing beyond what the economy can produce. That is, consumers want to buy, but the economy cannot produce enough products to cater to the demand. To bid on the limited number of goods available, manufacturers will pull the price up; hence, demand-pull inflation. An increase can influence this situation in money supply or public expenditure.

- Cost pull inflation

Or supply inflation, seller’s or mark up inflation, this inflation occurs when there are restrictions on the supply of one or more resources. It can also happen when the price is increased on one or more resources. Mark-up marks the difference between the cost of a product and its selling price. In this case, a producer may increase the price to make a profit.

- Structural inflation

This is the inflation that comes when producers cannot easily shift production to respond to changes in economic structure. In the economy, it is the change in demand processes and a shift in the technology of production.

Unemployment

Many people think they understand what unemployment means. However, it is a really wide and complicated subject. Unemployment can be defined as the loss of output, and also personal hardship for those looking for a job. Unemployment does not only reduce output, but it initiates high government expenditure on compensation and welfare programs, consequently leading to higher taxes. When there are high taxes on people, there is reduced productivity and efficiency. As such, unemployment does not only focus on the jobless youth, but it extends more in-depth into the general economy.

An unemployed person is any person between the age of 15 and 60 able to work, ready, and willing to work at the current wage rate, but they don’t work for lack of an opportunity. Some people may choose not to work, instead feeding from the alms of parasitic living they may choose. Such people are not counted among the unemployed because they choose the situation.

Various factors can cause unemployment. Hence, the types of unemployment include:

- Open unemployment.

There is no vacancy for a person with the ability and willingness to work.

- Underemployment

This type of unemployment happens when (i) a person engaged in part-time work is ready to work above what they are supposed to do, (ii) when a person’s productivity increases where they shift from the current occupation to another.

- Structural unemployment

This is caused by changes in economic structure.

- Frictional or transitional unemployment

A person shifts from one job to another, but have to remain temporarily remain unemployed due to specific issues.

- Cyclical unemployment

Downswings of the business industry cause this. It ends when there are upswings.

- Disguised or Hidden Unemployment

People tend to be employed, but in terms of productivity, they are not.

- Natural rate unemployment

Even with the best economy, there are always unemployment issues.

Economic policies

Unemployment and inflation are the biggest causes of economic collapse. As such, the government put into plays specific intending to reduce or control unemployment. Therefore, a lot of literature has been created on this topic. The following are the major economic policies

Policies that reduce labor supply

The government reduces labor supply, and in the process, reducing the number of people legally allowed to work. This is known as the labor, through which the government reduces unemployment. This process is more effective when it focuses on a targeted group with a higher unemployment rate than average. For instance, when a country faces high unemployment among young people, it can reduce the minimum employment age while encouraging companies to take them. Also, this can happen where a targeted group has a low level of unemployment since there will be more opportunities for the unemployed. Another approach would be to reduce retirement age reduction while increasing military service duration.

Policies concerning labor demand stimulation

The use of demand stimulation policies to reduce unemployment has become very popular. There are different policies in this regard. They are used depending on where they affect labor demand using demand-side or supply-side regulations.

Demand-side law stimulates economic growth by increasing the demand for a product. In this case, the incentive firms to make more, compelling them to hire more. In this case, governments use expansive fiscal and monetary policies.

Supply-based laws deal with companies and production lines to increase supply. The policies focus on the costs of labor and production function. If the cost is low, companies will have more money to hire more people. These laws are the latest economic doctrines aimed at ensuring sustainable economic growth.

Structural reform

Structural reforms are laws that seek to reduce real wages. Lower wages means companies can hire more people.

Income policies

These laws include an agreement between a company and its employees to reduce real wages. In this case, firms can hire more people, hence reducing unemployment.

Labor distribution

In these cases, employees work fewer hours. As a result, they earn less but allow many employees to be hired. These laws increase marginal productivity, but they are not very popular.

Fiscal policy as a way to fight unemployment, recession, and inflation

It is important to emphasize that monetary policy is the condition where government spending and tax policy are used to change the economy. However, it does not include all spending. Fiscal policies may shift aggregate demand outward, in the situation of expansionary fiscal policy and inward, as in contractionary fiscal policy.

Note that aggregate demand and aggregate do not always move together. Sometimes aggregate demand may fail to increase as total supply does. And there are a number of reasons for this, including households no longer see the reasons for the consumer; companies stop investments in such; demand for export from other countries fail.

Monetary Policy and Bank Regulations states that a central bank has powers of the banking system, and can use it against the business industry actions. For instance, in times of threatening recession, the central bank uses an expansionary monetary supply to increase the money supply. It can also expand loan quantities, reduce interest rates, and change aggregate demand from the left. If it is inflation that is threatening, the same bank may use contractionary laws to do the opposite for money supply, loans, interest rate, and aggregate demand.

Conclusion

The economic analysis seeks to understand how much a country has grown economically. And since inflation and unemployment are the major cause in this economic growth and development, governments apply different methods to keep things under control. And this is where fiscal and monetary laws come in. Fiscal policy is done through discretionary fiscal policy, where a government imposes taxation or consumption changes to as per economic reforms or through automatic stabilizers, where taxing and spending mechanism change in response to economic status. All these cases aim at increasing the GDP of a nationEconomy Analysis, ensuring a more sustainable economic trend.  


Comments




Send Comment

Need a custom
essay?

We will write it for you.
Order now

Free Essay Examples

Free essays:

Analysis of Consumption and Investment
Analysis of Business Cycles
Analysis of Fiscal and Monetary Policies
An Overview Of Economic Studies
Biosensors for cancer diagnosis
Business Analysis: Pricing strategies and Demand Curve
Broadcasting: How to Be Good In Front of the Camera
Bioconjugates for the Drugs Delivery
Cells of Immune system
Challenges that IT Managers are facing
Cochlear implant: what it is and how it works
Current challenges to the health of women
Doppler ultrasound or simply eco Doppler
DNA extraction
Dynamic Systems Modeling with Machine Learning
Digital Imaging: What Is It?
Economy analysis: Business Cycle and Economic Trends
Exchange rate and foreign currency risk
Economic Factors Affecting Decision Making In A Business
Economy Analysis: Inflation, Unemployment And Policies
Factors Influencing Interest and Exchange Rates
Fiscal and Monetary Policies in Response to 2008/2009
Fermentation: how it works and what it is used for
Financial Markets and Functions
Genetic regulation networks: modeling in biology
How does the economics of war affect society?
How can immigrants blend in the American society?
How to make your business survive at economic crisis
Importance of corporate sustainability
Interaction of Consumer and Firm Choices in Markets
Introduction to Microeconomics
Introduction of Microfabrication techniques
Journalism: What is News?
Journalism: Broadcast media and Television Presenters
Journalism: Sources of News
Journalism and Law
Key Determinants of National Income
Key Factors That Affect Pricing Decisions
Kinetic models in biology and Related fields
Know about the different forms of traditional African dances
Latest technology trends
Latest dance trends
Methods of labeling of nucleic acid that enable their detection
Macroeconomics: International Economic Issues
Neuromuscular disorders
National Economies, Fluctuation, and Responses to Fluctuations
Neurotransmitters: what they are and different types
Nanomedicines to target tumors
Overcoming Hiring Challenges for Nonprofit Organization
Principles of Microeconomics - Producer Theory
Principles of Microeconomics - Consumer Theory
Principles of Economics
Role of media in wartime.
Role of technology in the modern business environment
Role of Homeostasis in Human Physiology
Role of a digital artist
Skills in Journalism: Effective Interview
Systems biology - An understanding the functioning of biological systems
Self-assembly for biological systems
School of American Ballet
Types of corporate responsibility
The Role of Government Policy in Improving Economic Outcomes
Types of bioreactors and their applications
Technological perspectives and reflections of neural engineering
Understanding Perfect and Imperfect Competition
Ultrasound: physical principles and image formation
Understanding social entrepreneurship
Understand the importance of investigative journalism
Various theoretical perspectives of sociology
Virtual reality, what it is and how it works
What is MBA with Concentrations
What are the Causes of financial instability?
4 Facts about Origin of Mathematics!
5 techniques to create an animation
10 strategies to maximize corporate profits
13 Best colleges for political science in the world
6 Medical Technologies that revolutionized the healthcare in 2020
All you need to know about the ACA Code of ethics
Architecture and Democracy: An Introduction
Architecture and Democracy: Democratic Values
Architecture and Democracy: Democratic Procedures
All You Need to Know About a Synthesis Essay
An essential guide to understanding Film Theory
Application of Artificial Intelligence in Cyber Security
Applications of electrical engineering
Augmented reality: what it is, how it works, examples
Advantages And Disadvantages Of Social Networking
All you need to know about Cryptography
Applications of astrophysical science
All you need to know about architecture engineering
Applications of geological engineering
Artificial intelligence and medicine: an increasingly close relationship
An insight into Computational Biology
ACA code of conduct
A Rose for Emily
Applications of Mathematics in daily life
Architecture mistakes to avoid
All you need to know about Toxicology
All you need to know about Holistic Medicine
All you need to know about linguistics
An introduction to Linguistics and its subfields
All you need to know about Anxiety disorder
All you need to know about Drones
A Brief Insight into Political Science
Assumptions related to feminism
All you need to know about Byzantine emperors
All you need to know about labour economics
An insight into xenobots -the first-ever robots
An ultimate guide about Biomaterials
A Comprehensive Introduction to the Mona Lisa
Analysis methods of Transport through biological membranes
An ultimate guide about biochemical reactions
Analysis of brain signals
Artificial Gene Synthesis
Application to synthetic biology of CAD methods
All you need to know about metabolic pathways
Applications of BIOMEMS
All you need to know about the epidemiology
Asian vs. western leadership styles
All you need to know about Smart prosthesis
Analysis of Economy: Output of Goods and Services (GNP), and GDP on Economic success
A Guide to Pricing Strategies
An Overview Of Economic Studies
Analysis of Fiscal and Monetary Policies
Analysis of Business Cycles
Analysis of Consumption and Investment
How to Write a Personal Essay
Housing Needs in America
How to Write a Description Essay
How to Create an Excellent Scholarship Essay?
How to write a cause and effect essay
How to Hire the Best Essay Writing Service Provider?
How to Write a College Application Essay?
How to get the most out of your English lectures
How to write Expository Essay
How to succeed in your psychology class?
How to Write an Academic Essay in the Shortest Time?
History of Journalism
How Different Sectors are Using Artificial intelligence (AI)
How to write an informative essay
How to deliver persuasive essays?
How to Give a Convincing Presentation
How to write an essay on leadership?
Historical Art Still Around Today
Humanoid robot: what it is, how it works and price
History of Chemistry
Healthcare Advanced Computer Power: Robotics, Medical Imaging, and More
Healthcare AI: Game Changers for Medical Decision-Making and Remote Patient Monitoring
How to understand different types of English
How to Cope with Chronic Pain
How African American choreographers and dancers have influenced American dance
How mobile robot can do in logistics or in production
How To Become a Successful Entrepreneur
History of the Philosophy of Feminism
How is the climate changing?
How to Track Your Content Marketing ROI
How to Gun control In the USA?
Historical and contemporary role of labour in the modern world
How breast cancers are classified?
How the cells of our body communicate?
How the Lymphatic System Works?
How Digestive System Works
How to complete your capstone projects effectively?
How to write a research project
Healthcare technologies that help patients with better self-management
How to choose the topic of the senior capstone project
How to make your business survive at economic crisis
How can immigrants blend in the American society?
How does the economics of war affect society?
The Looming Energy Crisis in America
Top benefits of performance-based engineering
The More Languages You Know, The More Times You Are a Man
Things to consider while writing an Argumentative Essay
Top Ways to Improve Your Academic Writing Skills
Tips to Excel in Creative Writing
The origins of films in the early 19th century
Top career options in Architecture
The Elevator Pitch
Top finance trends 2020
The basic Structure and functionality of robots
The Way to Success
The election system of the President in the United States of America
Two-party System in United States of America
Top trends in urban design
The history and theory of African American filmmaking
Top benefits of creative writing
Tinnitus Guide: Common Symptoms and Treatment Options
The language of dance
The digital image processing management
Top famous politicians of the World
Top methods of political science!
The history of the feminist movement
The blood flow in cardiovascular system - Biofluid Mechanics
The best of Leonardo Da Vinci
The Structure and Function of Macromolecules
The structure of cell: a research on the bricks of the human body!
Tissue and organ construction: Adhesion and recognition between cells
The kinetics of the transformation processes
The Modeling of Biological Systems
Tips for writing a great thesis statement
The Defense mechanisms against infections
The impact of the technological innovations in medicine
Top journalism trends to know about
The relation between mass media & politics
Theranostics: Diagnosis and Care through Nanoparticles
The practical Applications of X-rays
The applications of Ultrasound in medicine
Transfer mechanisms of genetic information in Bacteria
The regulation of cellular metabolism in the diagnosis
The Principles of MRI Contrast agents
The technical basis of optical coherence imaging
The New Media: Emerging Trends
The Structure of Interest Rates and the Yield Curve
Technological perspectives and reflections of neural engineering
Types of bioreactors and their applications
The Role of Government Policy in Improving Economic Outcomes
Types of corporate responsibility
What is a Definition Essay?
What are diagnostic essays?
What is the relation between art structural engineering?
What is a Narrative Essay
What are robotics and intelligence systems?
What are the benefits of studying health sciences?
What is artificial intelligence and why it matters?
What is comparative Literature?
Why study neuroscience
What is Wi-Fi and how does it works
What is French history famous for?
What are Humanistic Studies?
What is covered in Biophysics?
What is modern journalism?
What is Virtualization? Benefits & Applications
What are modern public relations?
What is plasma physics?
What is teacher preparation?
What is rapid prototyping for 3D printing?
What is contemporary European Politics?
Why should you learn American Ballet?
What is engineering physics?
What is the purpose of African American Literature?
Ways to learn the Rhythm
What is digital art used for?
What are Enzymes and how do they work
Who is the father of political science?
Why Study Political Science - Job?
What is the Philosophy of Feminism?
What is a quantum computer?
Ways B2B Startups Streamline Their Conversion Strategies
Why do biomedical signals need processing?
What are the long term effects of climate change?
Why study labour relations
What is Holoprosencephaly?
What is antisocial disorder?
What are the important principles of evolution?
What is the cytoplasm and its function?
What is biopolymers?
What Makes a Good Leader
Women empowerment in modern generation
What is the history of political thought?
What is Gene recombination
What is synthetic biology
What is business cost analysis?
What is Inflation
What are the consequences of unemployment?
What is lithotripsy and its types?
What is transition elastography?
What is the purpose of deep brain stimulation?
What is a Brain-Computer Interface (BCI)
What is neuroethics?
What is Market and Supply and Demand
What is optogenetics?
What are the techniques to record brain activity?
What happens if the interest rate increases?
What is immunotherapy?
What is the economic role of the financial market?
What are the factors behind illegal immigration?
What is the lymphocyte activation?
What is financial market and its types?
What is the structure of financial markets?
What are the methods of measuring business performance?
What is the Credit market?
What is business ethics and code of ethics
What are the Causes of financial instability?
What is MBA with Concentrations