a) To remove all unemployment, the total increase in demand for workers across all categories must equal the total number of unemployed workers, which is 5,000,000.
In order to calculate the increase in GNP required to achieve this, we need to consider the increase in demand for each category of workers per 1 billion TSH increase in GNP:
- Doctors: 20,000 workers
- Secretaries: 30,000 workers
- Teachers: 25,000 workers
- Bodaboda workers: 15,000 workers
- Farm workers: 5,000 workers
Adding these up gives a total increase in demand for 95,000 workers per 1 billion TSH increase in GNP.
Therefore, to remove all unemployment (5,000,000 workers), the GNP must be increased by:
5,000,000 / 95,000 = 52.63 billion TSH
So, GNP must be increased by approximately 52.63 billion TSH to remove all unemployment.
b) Inflationary pressure would likely come from the increased demand for workers leading to higher wages, which could in turn lead to higher prices for goods and services. This would likely affect industries that heavily rely on the categories of workers that experience the highest increase in demand, such as secretaries and teachers. Additionally, if the increase in GNP is not accompanied by increased productivity, it could lead to demand-pull inflation as well.
Assume there are only 5 kinds of labour in the economy. Doctors, secretaries,
Teachers, bodaboda workers and farm workers. It is impossible to move from one category to
another without several years of training. Suppose that in each category there are 1,000,000 people
unemployed (thus in total there are 5,000,000 people unemployed), and each increase of 1 bill tsh
in GNP causes an increase of 20000 workers in the demand for doctors ,30000 for
secretaries,25000 for Teachers, 15000 for Bodaboda, and 5000 in the demand for farm workers.
Required
a) By how much must GNP be increased to remove all unemployment?
b) If GNP is increased to remove all unemployment, from which sources would
you anticipate inflationary pressure?
1 answer
1 answer