In this assignment, we’d discuss about the unemployment and inflation. What are the effects of inflation on unemployment?

1. MACROECONOMICS
TYPES OF UNEMPLOYMENT AND
INFLATION EFFECT ON
UNEMPLOYMENT.
In this assignment, we’d discuss about the
unemployment and inflation. What are the
effects of inflation on unemployment?
Submitted To:
Mrs. Aafia Mushtaq
Submitted By:
Khawaja Naveed Haider: 073605-085
Raja Qasim Jamil: 073605-086
Date:
Tuesday, March 17, 2009

2. 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 I’m 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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3. 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 couldn’t 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 don’t 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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4. 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 don’t 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 who’re 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 don’t 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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5. 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 it’s 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. Today’s condition of
world economy is showing gloomy picture. Even the world’s 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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