Macroeconomics in unemployment Research Paper Example | Topics and Well Written Essays - 1000 words

Macroeconomics in unemployment - Research Paper Example This paper is the best example of the thorough examination of such important macroeconomic factor as unemployment. People are considered to be unemployed when they are not actively doing productive work Unemployment rates are volatile and the other macroeconomic indicators play significant roles. Unemployment is a macroeconomic factor that is highly determined by other macroeconomic factors and its effects are widely felt across an economy. Several types of unemployment exist but four are majorly explored. The first one is seasonal unemployment that occurs due to differing needs of the hiring industries. Firms will hire employees during peak seasons when more production is required and retrench some of their employees during low seasons. The second type of unemployment is frictional employment and arises due to shifting of jobs by workers. It is also referred to as search unemployment because it normally takes time for an individual to secure a job after quitting one or after finishing their studies. Structural unemployment is another type and is caused by changes in technology and the structure of the economy. The fourth unemployment type is referred to as cyclical unemployment and results from changes in business environments It is important for an economy to maintain low rates of unemployment. The most important reason for this is economic consequences of unemployment such as the measure of the lost goods and services that the unemployed population could be contributing to the economy had they been employed. The scope of unemployment identifies wide initiatives such as governments’ monetary and fiscal policies to influence economic activities and other macroeconomic indicators towards sustainable employments rates. ... Low interest rates encourage borrowings for investments and private use. This further increases consumption and facilitates investment as firms are encouraged explore investment opportunities. This â€Å"redirect output towards its full –employment potential† (Stoup, Sobel, & Macpherson, 2009, p. 227). High interest rates from factors such as inflation or increased demand for financial services make investment expensive. The overall impact of the increased interest rates is therefore a contracted economy with lost employment opportunities towards higher unemployment rates (Stoup, Sobel, & Macpherson, 2009). There also exists a significant association between unemployment and an economy’s gross domestic product. The gross domestic product refers to the measure of all goods and services produced by an economy within a period, normally a year. Changes in the GDP will therefore reflect conditions of the labour market because the labour force generates realized produc tions. A fall in gross domestic product indicates a rise in the rate of unemployment, whether real or virtual. This occurs because if businesses resort to producing fewer goods and services, then some of the workers lose their jobs hence rise in unemployment. An increase in gross domestic product however associated with increased activity levels that further indicate lower unemployment rates (Mankiw, 2012). Unemployment also relates to consumer price index, a measure of the change in price of goods and services that are bought by individual consumers. The index also keeps track of changes in the cost of living. Low unemployment rates increase average economic potentials and this changes the consumer price