Question

Macro Economics

Chapter Six Concepts

1. Why are downturns—recessions and troughs—inevitable? Meaning why is it impossible to have a never ending expansionary decade after another?

Answer:

2. The unemployment rate is made up of frictional and structural unemployment. Explain why structural unemployment, in particular, increases additionally during recessions. And B) How might you protect yourself best against structural unemployment?

Answer:

3. What is the participation rate? And B) are the unemployed who consider themselves not seeking jobs counted as part of the unemployment rate? Explain.

Answer:

4. What is the unemployment rate if frictional unemployment = 1%, structural unemployment = .3%, seasonal unemployment = .4, and cyclical unemployment = 1.2%?

Answer:        

Answer 1

1) During the expansionary phase the economy experience rapid growth which tends to make the inflation in the economy to go up. Thus when inflation rate grows up the price level in the economy goes up which reduces the value of spending in the economy. Hence to reduce the inflation rate government follows various measures which will automatically reduce the growth rate in the economy.

When inflation goes up it will lead to recession even when the infoainfl goes down also it will lead to recession it is like unavoidable in the economy due to various factors that are prevailing in the economy like money supply, taxes, interest rates.

Economy is a complex problem where everything is interlinked so too much of expansion also leads to Recession which cannot be avoided.

Even if the government which in expansionary phase spends more money by borrowing also leads to downturn in the economy as it's tax revenue will be less than what is spending.

So recession, downturn and throughs are inevitable in an economy.

2) Structural unemployment: Unemployment which occurs due to the mismatch between the skills that the employees have to the skills that are demanded by their employers.

During recession the employers will be having a though phase as they have to cut their costs of production so that they can earn profits. At that time the employers will try to remove few people from their jobs. Hence the structural unemployment will be more during that period because the employers will try to remove employees who don't have the skills the employer requires.

I will try to be up date with the technological trends in my field of work so that my employer will not try to remove me during these type of situation. If I am updating myself I will have the advantage of knowing more knowledge about my work and even take new challenges which will help me to not to loose my job.

3) Participation rate: The ratio of total number of people in the labour force who are looking for job to the total number of adult population available in the economy.

Unemployment: People who are available actively looking for job but could not find a job are considered unemployed.

No people who are not seeking jobs are not counted as unemployed or in the calculation of unemployment rate necbeca they are not looking for means which means they dont want to work. If some one who don't want to work cannot be considered unemployed as they are not actively looking for jobs.