MACROECONOMICS

TYPES OF UNEMPLOYMENT AND INFLATION EFFECT ON UNEMPLOYMENT.

In this assignment, wed discuss about the unemployment and inflation. What are the effects of inflation on unemployment? Submitted To: Mrs. Aafia Mushtaq Submitted By: Khawaja Naveed Haider: Raja Qasim Jamil: 073605-085 073605-086

Date: Monday, February 25, 2013

Types Of Unemployment:
There are basically four types of unemployment which we discuss mainly in macroeconomics subject. 1. Frictional Unemployment 2. Seasonal Unemployment 3. Structural Unemployment 4. Cyclical Unemployment

Frictional Unemployment: This unemployment occupies people in the middle of transiting between jobs, searching for new ones; it is compatible with full employment. In other words, we can say it like when the job looses or job leaving situation is occurred, we can say it frictional unemployment. There are many people in this world who are not totally satisfied with their jobs. We can explain it more efficiently by taking the examples. Example No 1: One of my friends did the MBA in Marketing. He was offered a job from a company in the field of Finance. He worked there for few days and realized that Im losing my potential. He searched for a new job and left the previous job. Example No 2: My uncle is so religious. He was offered with the job in a bank. He studied about the system of banks and concluded that all the non muslim banks are surviving on interest. He decided to left his job and join the Islamic bank where he could feel satisfaction. Example No 3: My cousin was working in a reputed import firm. His work get him to the commission of rupees more than twenty hundred thousand. The firm refused to give them his right. He decided to left that job and started their own business.
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Seasonal Unemployment: The unemployment occur due to the change in a seasons or season factors, is called seasonal unemployment. We can also say it like layoff. In this unemployment, people get unemployed due to seasonal changes. We can easily define it more clearly by taking three good examples. Example No 1: In the business of garments, the business during summer is not much good. Some of the owners of the business decided to layoff some employees so that they couldnt be a burden on them. Example No 2: During the season of winter, most of the ice factories limit their business because of no demand during winter. They sometimes but I would say mostly layoff some of the employees to save the expenses and cost during the season of winter. Example: No 3: During the month of Ramazan, many restaurants limit their services. So that they dont need to apply double shifts in the restaurants. Employees are needed just after the aftari. In this situation, employees have to be layoff.

Structural Unemployment: The unemployment due to structural changes in the organization, economy or environment is called structural unemployment. To clear this point, we would take some examples. Example No 1: There was an operating system called DOS. Few years later, it got vanished from the market due to the fabulous entry of Windows Operating System. People are not required who only knows DOS. Though Windows was user friendly, but even then those people required some time to understand the operating system. The time lag between these two events was the structural unemployment.
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Example No 2: We all know that now a day, firms are going for computerization. They eventually converted their accounts to computerized accounts software. People, who dont know the computerized accounting system, had to left their jobs. Because computerized accounting system is so beneficial and time saving. Now, there are many institutes whore encouraging manual accountants to learn the computerized accounting system. Example No 3: In the developed countries, the use of letter for communication is gradually decreasing. They started to use email system that is very efficient and time saving. People dont have to wait for their letters. Industry of post office is not decreasing. People are getting unemployed due to the structural changes in the system.

Cyclical Unemployment: This refers to unemployment that rises during economic downturns and falls when the economy improves. It is a bit typical statement to understand but we will try to clear this point from the examples. Example No 1: You must have heard about the stock market. Now a day, the stock market is decreasing day by day due to economical changes. Due to the downfall of economy, people are getting unemployed due to low work activities in stock market. Example No 2: The representative of World Bank recently had a press conference about continues decline in the economy of world and considered the year 2009 as the heavy loss and declining year for the economies of world. Investments are losing in the countries and companies are trying to close their business especially under developed and non developed countries to save themselves from heavy losses. In this situation, thousands of the people got unemployed due to economic changes in the whole world. Example No 3:
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Recently, the well know Fashion Company, Marks and Spencer decided to decrease the number of employees. The company said bye to their 2000 employees because of economic stability in the world and also decided to close its more than 50 stores all over the world. Purchasing power of the people is decreasing.

Effect of Inflation On Unemployment

Inflation is another big problem of macroeconomics. It is said like too much money chasing few goods. Like we have to spend lot of money for buying few goods. It is all because of economics changes in the world. it also has the great impact on all the sectors of the economy like unemployment, consumers etc It is understood when the manufacturer is facing the high cost on producing the goods, he has to do something to cut down the cost. The major effect on cost is human resource. Then manufacturer has to downsize human resource to meet the cost for good profits. As I said earlier that inflation limits the purchasing power of a consumer and nobody would be easy to spend lot of money in few goods. To retain the cost according to the customer is so hard during the inflation. That affects the unemployment too. Todays condition of world economy is showing gloomy picture. Even the worlds second largest motor manufacturing company Toyota decided to downsize and just think what would do the smaller companies? Inflation is the problem of almost every country even the America and Australia where unemployment reaches to 12%. It is very bad for the countries like above. It becomes very hard to maintain the prices of the goods and services in such a severe situation. Inflation in Pakistan has been increased from 20% and unemployment rate is also increasing rapidly.

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