Production, unemployment and inflation.

Added on - 30 Sep 2019

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Production, unemployment and inflation11.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 workingpopulation of a country or place are engaged in some work, and they are being used in aneconomically 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 aparticular point in time. This implies that all the people in an economy are working; they havejobs and are employed.But, even when the economy is at full employment, there is some amount of unemployment inthe 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 thestructural unemployment occurs as the people are kept away from work during the restructuringphase. 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 ofconsumption 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 healthdeteriorates too, and their life span gets shorter.
Production, unemployment and inflation2The government has to introduce unemployment benefits for the person which is anadditional burden on it.People pay less income tax, and thus the earnings of the government fall.
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