Question

Inflation, Unemployment, & Economic Policies (v.v.i)

1. Define – inflation rate, unemployment rate,
2. What are the types of employment?
3. Discuss about the natural rate of unemployment
4. What is recession?
5. What are the impacts of recession on business & workers?
6. What happens in a recession and why do recession happens?

Aggregate Demand

1. Describe briefly about aggregate demand
2. Describe briefly about aggregate supply
3. What do u mean by demand pull inflation?
4. What do u mean by cost-push inflation?

Answer 1

• Inflation rate is the increase in the average price level of goods and services in a particular time period. In other words, it is the increase in the general price level and is a quantitative measure.
• Unemployment rate is the percent of the labor force who are without job. Unemployment rate is get by dividing the number of unemployed by the number of people in the labor force (employed and unemployed). According to the Bureau of Labor Statistics those who are unemployed and are not looking for one are not included in the labor force.
• The different types of unemployment are as frictional unemployment that arises due to people voluntarily changing jobs, cyclical unemployment that arises due to economic upturns and downturns, structural unemployment which arises through technological change and institutional unemployment which arises due to long-term institutional factors and incentives.
• The different types of employment are full time, part time, casual, voluntary etc.
• Recession is the significant decrease or drop in general economic activities or it is the period of declining economic performance that lasts for many months engulfing entire economy.
• Recession decrease the economic growth, wholesale-retail, employment, and industrial production while sales revenues and profits decline. It leads to higher unemployment, lower wages and incomes (of the workers)
• The overextension of credit and debt on risky loans and marginal borrowers, the expansion of the supply of money and credit in the economy, fragile business models, artificial suppression of interest rates are sone of the causes that led to recession. To sum up financial, psychological, and real economic factors cause a recession to accur. It causes economic contraction, while there is a less demand and businesses lose money.
• Total amount of demand for all finished goods/services that are produced in a country in a particular time period is termed as aggregate demand while as aggregate supply is the total supply of goods/services produced in a country in a particular time period and at a given overall price.
• Inflation due to rapid growth in aggregate demand while economic growth is too fast is demand pull inflation, whereas overall increase in prices due to increase in the cost of production is termed as cost push inflation.