Macroeconomics: Unemployment and Economic Growth in Greece

Running head: MACROECONOMICS
Macroeconomics
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Table of Contents
Summary of the report:..............................................................................................................2
Macroeconomic problem:..........................................................................................................2
Concept of unemployment and its impact:.............................................................................2
Economic growth:..................................................................................................................3
Relation between unemployment and economic growth:......................................................3
Economic data relating to the macroeconomic problem of Greece:..........................................3
Economic growth rate of Greece:..........................................................................................3
Debt-crisis of Greece:............................................................................................................4
Unemployment in Greece:.....................................................................................................5
Impact of unemployment on Greece:.........................................................................................6
Policies taken by the Greece government to reduce unemployment:....................................7
Proposed measurement to overcome problems:.........................................................................8
Fiscal policy:..........................................................................................................................8
Monetary policy:....................................................................................................................8
Policies to reduce unemployment in Greece:.........................................................................9
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

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Summary of the report:
At the end of 2016, economic growth and unemployment have remained high in
Greece though other countries of euro zone have recovered their position. At the end of this
year, unemployment rate of Greece has become 23.1 %, which has remained the highest rate
in euro zone. Labor market of this country has not been influenced instead of the broader
improvements in job sectors while in other countries of Europe the average number of
unemployment has reduced to 9.8 %, which has become the lowest over the last four years
(Giannakis & Bruggeman, 2017). The debt burden of this economy has remained very high
with 180% and consequently the growth of Greece has declined since the last three months in
2017 by 1.2 % (Financial Times., 2018). During 2015, this country has performed the worst
due to higher debt crisis and has reflected uncertainty. As a result, average GDP of the euro
zone has increased by 0.4% during the fourth quarter of 2016. However, the economic fall
supports the claims of Syriza government regarding the imposition of more austerity
(Fountas, Karatasi & Tzika, 2018). The International Monetary Fund has claimed that due to
slow growth, the country cannot achieve its determined budgetary targets and consequently
the country needs other structural reform for its pension and tax system.
Macroeconomic problem:
Hence, the chief problem of Greece is unemployment and slow growth of GDP.
Unemployment is considered as an economic obstacle that each country experiences. For any
developed or developing country, higher rate of unemployment is not desirable. This
economic phenomenon occurs when a person searches for an employment actively but cannot
find a job (Bulow & Geanakoplos, 2017). Thus, unemployment sometimes is used as an
indicator to represent health of an economy and for this unemployment rate is used. The
unemployment rate is represented by the number of unemployed people of a country divided
by the number of people in the total work force. Based on the definition of unemployment,
economists have divided it into two parts, which are, involuntary and voluntary
unemployment. According to the concept of involuntary unemployment, a person intends to
find a job at existing wages but remains unable to find. On the contrary, voluntary
unemployment indicates that a person leaves his or her job willingly or does not want to do
job at existing wages. In this context, it is essential to mention that involuntary
unemployment is a serious issue for an economy while voluntary unemployment is not.
Concept of unemployment and its impact:
Due to unemployment, an economy bears both social and economic costs that include
costs of government, personal costs and costs of the country in general. Costs to government
indicates as the lost of tax revenue while personal costs means loss of income. In addition to
this, costs to society means loss of national income or GDP. Thus, unemployment can
increase poverty level of a country and this in turn can lead households into debt, which
further can increase relative poverty rates (Christiano, Eichenbaum & Trabandt, 2016).
Moreover, unemployment can also reduce the amount of human capital of a country. Due to
lack of job, people cannot receive proper job training and consequently they cannot improve
their skills. On the other side, higher unemployment decreases tax revenue of the
government, as number of taxpaying people decreases due to their no income. Moreover,
people also reduce their consumption for which the amount of indirect tax also decreases. As

3MACROECONOMICS
a result, government is forced to borrow money from other internal or external sources which
in turn increases burden of public debt. In addition to this, economic growth of a country can
be decreased due to lower GDP. Higher level of unemployment indicates that an economy is
not performing efficiently with its full capacity. As a result, total amount of output and
national income for the country decreases significantly. Furthermore, unemployed person
cannot purchase large number of products and for this consumption level of that person along
with the country decreases.
Economic growth:
Economic growth is other macroeconomic concept, which represents capacity of an
economy to produce large number of goods and services over the year. Economic growth can
be obtained from both nominal and real terms while the second one is obtained as inflation
adjusted. For a country, economic growth is measured with the help of gross domestic
product (GDP) and gross national product (GNP) (Herndon, Ash & Pollin, 2014). Through
increasing aggregate productivity, a country can achieve economic growth.
Relation between unemployment and economic growth:
However, unemployment can lead economic growth of a country towards negative
direction. Firstly, unemployment exploits workers, as they are forced to accept low wages
and to work within an unfavorable environment. Secondly, this economic phenomenon can
generate a negative relation between employers and employees and consequently industrial
disputes can be occurred (De Neve et al., 2018). In this context, it can be mentioned that this
industrial dispute again increases unemployment to a large extend. Thirdly, unemployment
along with industrial disputes brings political instability within the country. Government
implements various policies to control this negative economic phenomenon. However, some
these of policies may generate conflicts among citizens and the government or can generate
conflicts among various political parties, which further generates instability. Fourthly,
unemployment generates social problems as poverty level increases. To meet basic needs,
those unemployed people involve themselves in some illegal activities that cause gambling,
dishonesty and immortality.
Hence, for any country, unemployment is not desirable as it reduces economic growth
and hampers socio-political and economical condition of it. For this, the government can take
various initiatives to reduce unemployment rate and to promote economic growth with the
help of monetary or fiscal policy or both. This economic phenomenon is also true for Greece
as discussed above. Hence, with the help of economic data related to this country, these
macroeconomic problems can be described. Moreover, this statistical data can also describe
trends and fluctuation of the country’s economy that can further measure the impact of
macroeconomic problem on Greece (Dritsakis & Stamatiou, 2017). After discussing these, it
can be suggested that what type of measure the government can take to reduce unemployment
level and to promote economic growth in this country.
Economic data relating to the macroeconomic problem of Greece:
Economic growth rate of Greece:
Greece is located in Southern Europe and ranks as 48th largest country all over the
world. In 2017, Greece has remained 7th largest economy among the 28 member of European