Question

need info about :

1-high unemployment

2-collapse of banks

Answer 1

1.High unemployment- Unemployment is a term that refers to people who are employable and who are pursuing a job but can not find a job. In addition, it's those people that are eligible for jobs in the workplace or pool of people who don't have an suitable job. Typically calculated by the rate of unemployment which divides the number of unemployed by the total number of people in the workforce, unemployment is one of the indicators of the state of an economy.

Demand deficient unemployment It is the primary cause of unemployment occurring especially during a recession. When demand for the company's goods or services is diminished, they will most likely decrease their production, making it unnecessary to maintain a large workforce within the organization. Staff are in turn laid off.

Unemployment is triggered by different factors arising both from the demand side, or from the employer, and from the supply side, or from the worker. It may be triggered from the demand side by high interest rates, global recession and financial crisis. Frictional unemployment and systemic jobs play a significant role from the supply side. Unemployment causes workers to suffer financial problems and can lead to emotional devastation. When this occurs, when left unaddressed, consumer demand, which is one of the main drivers of growth in an economy, goes down, leading to a recession or even a depression.

2. Collapse of banks- The collapse often starts with freezing of the liquidity. As long as money continues to flow in and out of a bank it will remain operational. If the flow stops for some cause it results in a crisis situation and may result in a complete collapse if not resolved. Unlike a finance company that collects funds from fixed term, a substantial portion of the money collected by banks contains what needs to be paid back on demand immediately

The money earned from all these credits is locked into loans. If all depositors claim funds at the same time for some reason even the healthiest bank in the world can not survive. The banking regulator Reserve Bank of India maintains that banks deposit part of their deposits with FED in the form of cash reserve ratio and part of it in government bonds that can be sold easily in order to meet sudden unexpected demands. Banks will borrow money from the FED and other banks using government bonds.

The quantitative easing conducted by monetary authorities around the world has been an attempt to keep the money flowing and to ensure no credit pinch. By printing and offering loads of money to banks (a mechanism known as quantitative easing), policymakers hoped that banks would eventually make profits and return the capital.