THE INFORMATION BELOW IS COMING DIFFERENT SOURCES.

ACKNOWLEDGEMENT

IT’S ABOUT THE INFLATION AND UNEMPLOYMENT

RECITED BY P.NYOMBO

Inflation & Phillips curve:

The inflation rate is the percentage change in the price level.

The Phillips Curve shows the relationship between the inflation rate and the unemployment rate.

CHARACTERISTICS OF BUSINESS CYCLE

Upward and downward

movements

Wake like movement in

economic activity

Economy-wide fluctuations in production or

economic activity over sveral months

or years

Expansion and contraction in a

business cycle are self-reinforcing and cumulative in effect

Measured by considering the

growth rate of real gross domestic

product

STAGES OF BUSINESS CYCLE

Peek /Boom Economy full employment A prosperity period

Economy experience a high level of output and

trade,higher employment levels

and income

More investment from business

optimism

Could be situation where the number jobs more than the number

of workers- lead to increase in

wages,price,interest and profit

STAGE OF BUSINESS CYCLE

Recession

A decrease in yhe volume of

output,trade and transactions

An increase in the level of

unemployment

A reduction in aggregate income in terms of wage

and profit

Decline in consumption

expenditure and investment level

STAGE OF BUSINESS CYCLE

Trough

Minimum point recession

ends(real GDP stops falling)

Will last until there is an

increase in real GDP

The overall economic

activity will fall to the lowest

level

Unemployment rates will be

higher and will create many

problems

Period of great suffering and

hardship facing by society

The worst phase pf

business cycle

UNEMPLOYMENT• A situation where labour force participants are available and willing to work but are unable to find jobs.

Definition unemployme

nt

• A percentage of the labour force who are unemployment and are actively seeking jobs

• UR (%) = Number of unemployment/Labour force X 100%

Unemployment rate

• The situation in the economy where al available resources are employed to produce goods and serviceFull

employment

TYPES OF UNEMPLOYMENT

Frictional unemployment

• Occurs when people are in between jobs,entering and reentering the labour force

• Ex : peolple quit their jobs for a better positions or higher wages or when fresh graduates are actively seeking for a job

Cyclical unemployment

• Occurs when there is a lack of jobs because of a downswing in a business cycle or a recession

• Companies close down and the workers are laid off

Structural unemployment

• Arises due to structural changes in the economy of a country• Respon quickly meet changing demands,technological or

comprtition

Seasonal unemployment

• Arises due to seasonal variation in the activities of particular industries

• Caused by climatic changes,fashion or inherent nature

Effect of unemployment

Effect on individuals and society

Loss of income and self respect

Loss of job skills

Socials and political problems

Effect on the economy

Loss in government revenue obtain from

personal taxes

Reduce development activities of the

economy

Lead to slow economic growth and low output

MEASURES TO CONTROL UNEMPLOYMENT

Monetary policy

Open market operation – Purchase of securities or

short term bonds

Lowering the reserves requirement

Lowering the discount rate

Lowering the interest rate

Fiscal policy

Decrease in taxes

Increase in government expenditure

Direct control measures

Providing training and technical education

Development of new land

Job creation in varios sectors in an economy

INFLATION• A continuous increase in the general

price level of goods and services in the economy

• Deflection- a decrease in the general price level of goods and services in the economy

• Stagflation- when an economy experiences high unemployment and rapid inflation simultaneously

Definition

• Inflation rate= CPI this year – CPI previous year/CPI previous years X 100

• CPI (index that measure changes inn the average price of consumer goods and services

• Disinflation a reduction in the rate of inflation

Measure inflation

TYPES OF INFLATION

• When aggregate demand cannot meet the aggregate supply

Demand-pull inflatio

n

• Increase in the general price level associated with an increase in the cost of production

• Factors• 1)Wage-push inflation • 2)Profit-push inflation• 3)Import –push inflation

Cost-push

inflation

EFFECT OF INFLATION

Distribution of

income

Savings Production

Balance of trade

MEASURE OF CONTROL INFLATION

Monetary policy

Open market operation-selling of

securities or short term

bonds

Raising the reserve

requirement

Raising the discount rate

Raising the interest rate

Selective credit control

policy

Fiscal policy

Increase in taxes

Decrease in government

spending

Direct control and rationing

Price control and rationing

Anti-hoarding campaign

Compulsory savings

Causes of Inflation:

Demand-pull inflation is inflation initiated by an increase in aggregate demand.

• Cost-push, or supply-side, inflation is inflation caused by an increase in costs.

Demand pull :

Increase in AD can be due to a fiscal or monetary policy, thus increasing prices

Cost push:

Upward shift of the AS will be due to increase in costs due to increase in price of inputs.

Stagflation:

Stagflation occurs when output is falling at the same time that prices are rising.

One possible cause of stagflation is an increase in costs.

Combination of both:

21

Measuring Unemployment

Civilian Noninstitutional Adult PopulationAll civilians 16 years of age and olderExcludes institutionalized in prisons or mental hospitalsExcludes those in military

Labor forceThose in the adult population who are either working

or looking for work

22

Measuring Unemployment

UnemployedThose with no job who are looking for work

Unemployment rateMeasures the percentage of those in the labor force

who are unemployedEquals the number unemployed divided by the

number in the labor forceDoes not include discouraged workers

Discouraged workersThose who are no longer looking for work but are

unemployed

23

Trend of Unemployment Rate

Decline in the unemployment rate over last 20 yearsOverall growth in the economyRelatively fewer teenagers in the work force

Unemployment rate says nothing about who is unemployed or for how long – differs across

RaceGenderAgeGeographical areaOccupational group

24

Exhibit 3: Unemployment Rates for Various Groups

UNEMPLOYED E PEOPLE

CONCEQUENCES OF UNEMPLOYMENT

http://www.slideshare.net/RajendraPSharma/presentation-on-povertyunemploymentandeducationnepal?qid=614f0791-c8f8-44fe-bef5-e98f18fffdc3&v=qf1&b=&from_search=5

http://www.slideshare.net/mandalina/unemployment-and-inflation?qid=7412aa43-a7c8-444b-ac12-83a85ca5c6ad&v=qf1&b=&from_search=5

http://www.slideshare.net/videoaakash15/inflationunemployment

REFERENCES