Question 4 a Describe using examples the four types of unemp

Question 4 a) Describe using examples the four types of unemployment we generally come across. b) What does a lowering of unemployment usually imply for future inflation? onsequences of such uncertainty? my and what are the Macro

Solution

Answer:-

Frictional unemployment is the situation of unemployment which results manly due to the shifting of the individual from one job to other for finding better job opportunity. This is mainly a voluntary activity but it can also be resulted from lay off or termination with cause. Friction can be defined as the time, effort and expenses which are incurred by the individual to gain a new job.

Structural unemployment mainly results from the industrial reorganization and it could be initiated mainly due to technical advancement r changes rather than originated from the fluctuations in the demand and supply. In simple words, it can be seen as a mismatch between the jobs available and the skills possessed by the manpower.

Seasonal Unemployment :- This is the type of unemployment which is resulted from the seasonal nature of the unemployment. For example:- Tourism

Cyclical Unemployment:- These are the unemployment chances which are resulted due to cyclic nature of the business cycle. For example, during depression and recession, many jobs are lost due to decline in labor demand.

What does a lowering of unemployment usually imply for future inflation

Answer:- With the lowering of unemployment, the purchasing power of the individuals increases and also with the increased employment, more people tend to having purchasing power resulting in the increase in the demand but the supply does not increase in the similar ratio. Therefore the price of the commodities starts increasing resulting in the form of inflation.

Answer:- why is the uncertainty about inflation a concern for the economy?

Response:- If there is uncertainty about the inflation, the investment opportunity and interest rates prevailing in the economy can also not be determined precisely. With this uncertainty, the business will not find it attractive to invest in the economy as with the uncertain inflation rates , the businesses are uncertain about future prices, profits and costs. This uncertainly will result in the confusion and reduction in the economic growth over the long time.