13. Unemployment refers to the state of being without a job or work. It is a measure of the number of individuals who are actively seeking employment but are unable to find suitable jobs. Unemployment can be measured using several indicators, including the unemployment rate, labor force participation rate, and the number of discouraged workers.
The unemployment rate is calculated by dividing the number of unemployed individuals by the total labor force (employed + unemployed) and then multiplying it by 100. The labor force participation rate is the percentage of the working-age population (usually, 16 years and older) that is either employed or actively seeking employment. Discouraged workers are those who have given up searching for employment due to a lack of job opportunities and are not counted in the unemployment rate.
14. Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time. It erodes the purchasing power of money and reduces the value of each unit of currency. Inflation can be caused by various factors, including:
a) Demand-pull inflation: When the demand for goods and services increases faster than the economy's ability to produce them, there is an excess demand that drives up prices.
b) Cost-push inflation: When the cost of production increases, such as a rise in wage rates or raw material costs, businesses may pass on these increased costs to consumers, resulting in inflation.
c) Monetary inflation: When the money supply in an economy increases faster than the growth in production, it can lead to inflation.
Inflation has both positive and negative impacts on an economy. Some of the negative impacts include reducing the purchasing power of consumers, leading to a decrease in real income. It can also create uncertainty and instability, making it difficult for businesses to plan for the future. On the positive side, moderate inflation can encourage spending and investment as people try to avoid the erosion of their money's value. It can also help in reducing the burden of debt and stimulate economic growth. However, when inflation becomes too high or unpredictable, it can distort economic decision-making and hinder long-term growth. Central banks and governments often aim to manage inflation within a target range to maintain price stability and promote economic stability.
13. What is unemployment? How can we measure it?
14. What is inflation? What are its causes? What is its impact on the economy? �
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