HELP! unemployment (1 Viewer)

[aditya]

hey guys, im soooo confused...

my teacher has set an in class essay on the topic of unemployment, but he said that it will be a stimulus based task and will require u to talk about the relationship between unemp./eco growth/ and inflation!?

so he is basically just saying talk about the business cycle and including a few unemployment concepts like the curves and gaps and NAIRU (could some1 explain that?)??

do u old timers think i would need to talk abotu ANY impacts of unemployment at all? or go defining the different forms of unemployment specifally?

CONFUSED! help...

please

 

[-=«MÄLÅÇhïtÊ»=-]

juz briefly...(been a while since i dod hsc)
relationship between the 3:
if growth increaes, unemployment decreases, inflation increases.

...u should check out ur textbook...it definitely covers this in economic stability.

curves - inflation and unemployment are inversely related..is it the philips curve that displays this?

NAIRU from memory was natural rate of employment which occurs at full employment?

dunno if im right...hopefully ive given u a few words u can look in index of ur textbook ^^

oh and dun juz give definitios etc. if u wanna score high in essays dun juz give a textbook answer and explain wat everything is. u gonna use wat uve learnt to be insightful.

 

[i-color]

basically the relationships are that eco growth leads to more employment as production etc increase, but it also means a higher inflation rate as demand for goods and services increase. And as said above, phillips curve is good to show this. However, you should also talk about that in the long term, this trade off between unemployment and inflation does not really happen due to structural rate of unemployment (otherwise known as NAIRU)

Also u could refer to how the RBA has been able to keep inflation low at between 2-3% without threatening the rate of une. In fact une has actually fallen to its lowest in 15 years to around 5.6%, which is very near our structural rate of une. This means that our cyclical unemployment is almost zero, and this has been a result of our strong eco growth for the past 13 years.

When talking about eco growth and unemployment and inflation etc, talk about hte multiplier process and the transmission mechanisms. Like how eco activity can stimulate increases in production, expenditure, employment etc via the multiplier process

 

[aditya]

lol thanks genius... that just gives me the structure for my essay.. haha

but the reason the inflation rate is low is ONLY because of the dollar rising so much, resulting in cheaper imports?

is this true or false, notice the ONLY

thanks

 

[George W. Bush]

well, in economics, rarely is one single factor soley responsible. but I think it would be fair to say that the dominant downward pressure on inflation has been the significant appreciation of the AUD recently.

 

[aditya]

lol i had to read ur response llike twice to udnerstand it
hahaha

mr sofisticated

 

[George W. Bush]

in eco, you gotta sound like an economist

 

[gari]

dudes thanx for the info, it really helped simplify the convoluted explanation in textbooks

btw, what exactly in an inflationary expectations augmented phillips curve?? (my school is crazy)

 

[aditya]

isnt that NRU? its wat the economy expects the inflation rate to be... if they expect it to be high, then they demand wage increases, this causes the firms to ditch labour and move to capital or highly specialised labour (ok i made the last one up, just came to me, seems logical *confused*), if its zero, they expect it to stay at zero...

but i think thats wat it is? ive neve heard it called that "augmented"

 

[George W. Bush]

The Phillips Curve showed a trade-off between unemployment and inflation. However, the problem that emerged with it in the 1970s was its total inability to explain unemployment and inflation going up together - stagflation. According to the Phillips curve they weren't supposed to do that, but throughout the 1970s they did. Friedman then put his mind to whether the Phillips Curve could be adapted to show why stagflation was occurring, and the explanation he came up with was to include the role of expectations in the Phillips Curve - hence the name 'expectations-augmented' Phillips Curve. Once again the supreme logic of economics comes to the fore!

Friedman argued that there were a series of different Phillips Curves for each level of expected inflation. If people expected inflation to occur then they would anticipate and expect a correspondingly higher wage rise. Friedman was therefore assuming no 'money illusion' - people would anticipate inflation and account for it. We therefore got the situation shown below:

[img="http://www.bized.ac.uk/virtual/economy/library/theory/monetarist2.gif"]

Say the economy starts at point U, and the government decides that it want to lower the level of unemployment because it is too high. It therefore decides to boost demand by 5%. The increase in demand for goods and services will fairly soon begin to lead to inflation, and so any increase in employment will quickly be wiped out as people realise that there hasn't been a real increase in demand. So having moved along the Phillips Curve from U to V, the firms now begin to lay people off once again and unemployment moves back to W. Next time around the firms and consumers are ready for this, and anticipate the inflation. If the government insist on trying again the economy will do the same thing (W to X to Y), but this time at a higher level of inflation.

Any attempt to reduce unemployment below the level at U will simply be inflationary. For this reason the rate U is often known as the natural rate of unemployment.

 

[!A!]

same

 

[aditya]

For this reason the rate U is often known as the natural rate of unemployment.


and the NAIRU...

 

[kochou]

crap, we've learnt this topic already, but how come you guys sound like your talking in a foreign language ><