Question

9. Discuss why the Unemployment Rate is a good measure of a countries economic well-being and why it is a poor measure.

a. (5 points) Why is the Unemployment Rate a good measure?

b. (5 points) Why is the Unemployment Rate a bad measure?

Answer 1

a. The unemployment rate is a good measure of economic well being because it indicated the production activity taking place in the economy. As the production in the economy increases, the unemployment rate declines and as the production level in the economy decreases, the unemployment rate rises. Thus, it indicates the level of GDP in the economy. It also indicates the people who are employed and thus consumption expenditure in the economy.One can state the overall health of the economy by having a look a measure of unemployment rate.

b. Unemployment rate is a bad measure because it fails to indicate the level of inequality in the economy, happiness index of people, leisure enjoyed by people, environmental health of the economy as it indicates the GDP level of the economy. However, the overall economic well being of a nation depends on the quality of life also which is missing from the unemployment statistics.