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Production, Unemployment and Inflation

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Added on  2019-09-30

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This module covers the causes of unemployment, costs of unemployment, CPI as a biased measure of inflation rate, government tax revenue and spending, and limitations of using GDP as an indicator of standard of living.

Production, Unemployment and Inflation

   Added on 2019-09-30

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Module 1 - CasePRODUCTION, UNEMPLOYMENT, ANDINFLATIONStudent[Pick the date]
Production, Unemployment and Inflation_1
Production, unemployment and inflation 11. Why is there unemployment even when the economy is at “full employment”? What are some “costs of unemployment”?AnswerFull employment occurs in an economy when all of the labor resources and the working population of a country or place are engaged in some work, and they are being used in an economically efficient manner (Ball, 2014). In full employment, all the people who are skilled, unskilled, and semi-skilled and have the potential to get employed are embodied in work at a particular point in time. This implies that all the people in an economy are working; they have jobs and are employed.But, even when the economy is at full employment, there is some amount of unemployment in the economy. This is mainly the frictional unemployment and the structural unemployment. When the people are engaged in the process of changing their jobs, then frictional unemploymentoccurs, and when the industrial reorganization happens like the change in technology, then the structural unemployment occurs as the people are kept away from work during the restructuring phase. Thus, some amount of unemployment remains during the full employment.There are some of the costs of unemployment which are as follows (Junankar, 2016):The standard of living of people declines; they save less and invest less. The level of consumption falls too which is neither good for the individual, or for the economy.The skills of the people get eroded due to unemployment, and the talent gets wasted.There is the adverse impact on the mental health of workers; their physical health deteriorates too, and their life span gets shorter.
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Production, unemployment and inflation 2The government has to introduce unemployment benefits for the person which is an additional burden on it.People pay less income tax, and thus the earnings of the government fall.
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