Economics and Quantitative Effect and Analysis

Question: Discuss about the Economics and Quantitative Effect and Analysis. Answer: Introduction: The state of the economy in which the people search for jobs but they are unable to get one is known unemployment. Several reasons behind occurrence of unemployment within an economy are as follows: Lack of information: One main reason behind unemployment is the fact that the information about the existing scopes in the market is not well circulated amongst the people (Mankiw 2014 pp. 213-217). Inefficient allocation of resources: Often resources are not properly allocated or the firms, which results in unemployment, do not efficiently use them (Diamond and Rothschild 2014 p. 224). Technological up-gradation: Use of capital-intensive goods in production increases the efficiency of production but it dampens the employment generation scope of the economy and also leads to labor shirk off (Bendassolli, Gondim and Coelho-Lima 2015 pp.153-164). The following reasons are to be blamed behind the un-avoidance of unemployment in the economy. Unemployment may exist in the market as people may not get jobs in accordance with their preference and thereby has to continue their job search (Mankiw 2014 p. 215) . The government of any nation always tries to minimize the level of inflation in the economy. As inflation and unemployment are inversely, related hence reducing inflation causes an escalation of unemployment (Bendassolli, Gondim and Coelho-Lima 2015 pp.153-164). The number of people searching for jobs, the pattern of jobs available and the number of people changing their existing jobs is always changing. Hence, some people always remain unemployed in the economy (Mankiw 2014 pp. 213-217). Hence, the ideal condition for an economy is to be in its natural rate of unemployment where there is going to be subtle balance between the inflation and unemployment. Inflation according to the definition is the increase in prices of goods and services for a continuous period within an economy. It is a plague for the economy and needs to be strongly controlled by government intervention (Hansen 2016 pp.87-90). Inflation can be of two different types depending on the factors that induces the rise of prices in the economy. There is cost-push inflation that occurs as a result of increase in the production cost of the goods and services. The demand-pull inflation on other hand occurs with sudden increase in the demand within the economy, which cannot be met by the supply of that period (Blanchard and Riggi 2013 pp.1032-1052). The necessary condition for inflation is as follows: There has to be increase in the overall price level The increase must be considered over a stretch of time. As per the question, the time frame has not been stated and hence I differ from the statement in the question. The prices in the economy may rise due to several other factors and that price hike cannot be termed as inflation. Instances like natural calamities, sudden declaration of warfare and even changes in the oil price can cause the general level of price to rise (Blanchard and Riggi 2013 pp.1032-1052). It cannot be connoted as inflation unless the high price continues to exist and increase with the time. Real Gross Domestic Product (GDP) can be defined as the monetary value of total production within the boundary of the country within a year after adjusting for the changes in price (Anderson 2014 p.121). The drawbacks of real GDP as an economic indicator are as follows: Measurement of GDP leaves out the basic components of economic well-being like the health condition of the people, the lifestyle and the level of education that the people achieve (Mankiw 2014 p. 135). Some country often shows high level of GDP but at the same time has high level of poverty. This is because the income generated is not equally distributed within the population. This indicator cannot measure the distribution of income within the people (Giannetti 2015 pp.11-25). From the economys production side, it is always better if a person works for longer hours. Nevertheless, from the labors view, it may so happen that working for a fixed hour and spending the other time for leisure brings him happiness. GDP cannot measure the peoples psychological aspect (Anderson 2014 p.121). The measurement of GDP does not take into account the impact on the environment. Establishment of new industries within the country yields more output and increases the GDP but at the same time depletes the environment and creates long-term effect on the economy (Pretty 2013 pp. 475-499). GDP is not able to focus on the distribution of income within the gender groups. Often females are exploited with low wage offerings than their male co-workers. This creates social inequality within the organization and economy (Giannetti 2015 pp.11-25). Hence, it can be said that real GDP is an unreliable indicator of peoples living standard. References: Anderson, V., 2014.Alternative Economic Indicators (Routledge Revivals). Routledge. Bendassolli, P.F., Gondim, S.M.G. and Coelho-Lima, F., 2015. Attributions of causes for unemployment by unemployed workers.Anlise Psicolgica,33(2), pp.153-164. Blanchard, O.J. and Riggi, M., 2013. Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices.Journal of the European Economic Association,11(5), pp.1032-1052. Diamond, P. and Rothschild, M. eds., 2014.Uncertainty in economics: readings and exercises. Academic Press. Giannetti, B.F., Agostinho, F., Almeida, C.M.V.B. and Huisingh, D., 2015. A review of limitations of GDP and alternative indices to monitor human wellbeing and to manage eco-system functionality.Journal of Cleaner Production,87, pp.11-25. Hansen, B., 2016.A Study in the Theory of Inflation. Routledge. Mankiw, N.G., 2014.Principles of macroeconomics. Cengage Learning. Pretty, J., 2013. The consumption of a finite planet: well-being, convergence, divergence and the nascent green economy.Environmental and Resource Economics,55(4), pp.475-499.