Question

1. How to distinguish between frictional, structural, and cyclical unemployment? Why is unemployment an economic problem? What are the social effects of unemployment?

2. Why do economists include only final goods and services when measuring GDP for a particular year? Why don’t they include the value of the stocks and bonds bought and sold? Why don’t they include the value of the used furniture bought and sold?

3. Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9,000 pizzas. Relate this information to the following statement: “Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus ‘move outside its production possibilities curve.’”

Answer 1

Unemployment can be defined as the situation Where people are employable and seeking a job but are unable to find a job. People who are willing to work is not geting a job is a situation of unemployment.

Frictional unemployment, structural unemployment and cyclical unemployment are 3 important types of unemployment.

1.Frictional unemployment happens when poeple vountarily change their jobs.This unemployment happens mainly when somebody recently quit the job because he is looking for a most suitable job.It is not a permanent unemployment .So it is not an unhealthy situation which will exists for a short period.

Eg;If somebody quit his job from a company to join in another company offering high salary .

2.Structural unemployment happens when there arise any technological transformation and if the skill of employer is not matched with skill demands of job, or employer cannot reach to the correct location of available job.

Eg:many mechanically expert employers lost their job with the spread of computer technology.

3.Cyclical unemployment is an unemployment rises during recessionery period and declines during the period of economic growth.

Eg:unemployment during the period of decline in oil price

Unemployment rises in an economy because of many reasons that come from the flactuations in both demand for labourer and supplyof labourer.

Un employment is a crucial economic problem.When unemployment rates are high it affects long run economic growth.It wastes resources, increase poverty,reduce labour mobility and promote social conflicts. High unemployment rate indicates that the economy is not producing its full capacity, not maximising its output, mostly living in lowest standard of living and lowest wage rate.

Unemployment will create individual, social and sociopolitical effects in the economy. Unemployment gives too much mental pain for a worker. They need subsistence level of consumption during the period of unemployment.Un employment lower the purcahsing power and lead to poverty.High unemployment means not using resources fully,mainly human resources.At that situation labourers compel to work below their skill level.High rate of unemployment indicate economic distress, and someitimes is a symbol of overheated economy

2)GDP is the value of all final goods and services produced in a country during a specific period of time usually one year.Its value includes the value of all finished goods.The value of used furniture didn't include inthe calculation of GDP.Because it is not produced in the current year.So its value is a part of a previous years GDP.

Like that value of stock and bond is also not a part of GDP.Because it is not a produced good.The value of produced good only including in GDP.

3)Here it is assuming that by a ppc,a country sacrifices 10000pizzas to get 1industrial robot additionally.The country can purchase it from another country by sacrificing 9000 pizzas.

Opportunity cost is the potential benefit received by an individual or firm when choosing one alternative over another.It will help to make a more profitable decision.

Its simple equation ,opportunity cost=FO-CO

where FO is the return on best foregone option and CO is the return on chosen option.

Opportunity cost is expressed with the help of production possibillity curve.Through international specialisation and trade,that is producing the most profitable commodity by each country, any country can import the cheepest commodity. It is done by comparing opportunity costs