Employment, Labour Market and Guaranteed Pension - Assignment Example

Macro and Micro Economics By Question one: Employment i. Labour force In the context of economics, labour force refers to the combination of the population in a country that is employed and non-employed (Lipsey and Chrystal, 2007). The employed are the population that has work or operate businesses that are active while the unemployed are those seeking for work actively since they are always willing and able to do any kind of work. Adults - employed – 19500000 Unemployed – 1120000 (19500000+1120000) Labour force = 20620000 ii. The rate of participation in labour force The labour force participation rate is found by the expression as a percentage of the ratio of the labour force (the employed plus the unemployed that are actively seeking for jobs) Therefore the labour force participation rate = (labour force/number of civilians)*100 (20620000/31620000)*100 The rate of participation in labour force is 65.21% iii. Unemployment rate This refers to the percentage of the entire labour force that is not employed but is active in looking for jobs. This population is willing and able to deliver effectively and efficiently. Unemployment rate = (unemployed/labour force) * 100 (1120000/20620000) * 100 Therefore the unemployment rate = 0.054*100 = 5.4 % 2. Labour market The labour market refers to the supply of the available workers in relation to the work available. This means that it is the concept of economics allows workers to be directly proportional to the amount of work available. The effects of an increase in the minimum on the wage paid to workers This is a positive reward to both the labour market and the workers. An increase in the wages paid is a motivational factor that will trigger the workers to deliver effectively, as they will always target for more rewards (Lipsey and Chrystal, 2007). Through this, the organization will also grow since the output or rather production will be appropriate enough to generate great returns thus abnormal profits. The workers will always be in a good mood, they will enhance teamwork and standard delivery since the conditions in the working place will be conducive. The element of being comfortable in the place of work is majorly due to good payments since the earnings are the backbone of deliverance in the place of work. The employers should therefore always learn to give their employees payments that are standard according to the economic standards of a country in order to enhance sustainability. - Effects of number of workers supplied When there is an increase in the number of workers supplied, the labour force will automatically rise, this is due to the increased sills in the organization. Thus, employers should make sure that the employees being recruited in the organization are having the knowledge of that particular job plus adequate experience. This combination of qualities will automatically lead to an increased production (Lipsey and Chrystal, 2007). Effects of the number of workers demanded When an organization is out of labour force, it should immediately react by seeking more employees by only recruiting the individuals with standard qualities. The level of quality production will be determined by the kind of employees due to their coordination and competence in the place of work. Effect of amount unemployment The rate of unemployment is a very sensitive issue in the economic context. Various organizations should reduce this problem by recruiting more employees who will facilitate innovations in the organization. The unemployment issue should be discouraged as it hinders the rate of development in an economy. Once the issue is settled, various organizations will find markets for their products, as many people will be willing and able to pay for the goods and services that enhance sustainability (Lipsey and Chrystal, 2007). 3. Guaranteed pension An example of a law that requires employers to provide employees with some benefit that increases the cost of an employee by four Euros an hour. i. Effect of the new law on the demand for labour The labour sector will be on high demand. Due to this concept, the employers will have to employ competent employees with the appropriate knowledge and skills in order to maximize the production in the firm or organization that will in turn generate adequate revenue to cater for the payment of workers. Generally, the demand for labour will rise and its quality will be valuable enough. ii. Effect of new law on supply to labour If the employees place a value on this benefit exactly equal to its cost then the supply of labour will be highly valuable, as the employees will tend to deliver effectively due to the good payments (Lipsey and Chrystal, 2007). Once the wages or salaries are of good standards, the employees will always deliver in order to retain their chances because the competition will be stiff and those who are not fit will automatically lose chances. iii. Effect of the new law on both wages and level of employment The employers can be at one point worse off because they have to pay the workers the additional amount whether there are god sales or not. The employees are therefore at a good position because their payment will always be constant no matter the kind of situation in the business premise. It is therefore upon the employers to make sure that the organization has a market for its products to generate enough revenue for payments. iv. Effect of employment and unemployment The employers will tend to maintain the number of workers in the organization due to their knowledge and experience. The employers may also train the employees how to multi task thus this may make the employees who are seeking employment at a worse off position. v. Effect of the workers not valuing the new law Once the workers do not value the new law, then the employers will run into great losses. This is because the employees will not have the required focus in the performance of the organization but rather the additional cost of four Euros per hour (Lipsey and Chrystal, 2007). Thus, for this law to be a success both the employers and the employees should not focus on self-interest. Question two: Money growth and inflation i. Price level This is an economic concept that averages the recent prices across the production joints of goods and services produced in an economy. The index of price level for the year is also known as the gross domestic product deflator Therefore Price level = (Nominal gross domestic product/Real gross domestic product)*100 = (10,000,000,000,000/5,000,000,000,000) * 100 The price level is equal to 200% Velocity of money refers to the process of how fast money passes from possession of one individual to the next. It is also known as velocity of circulation of money. Velocity of money = (Price level * Real value of transactions) / Total nominal amount (200 * 5000000000000)/ 10000000000000 Therefore, the velocity of money is equal to 20 units ii. The effect when the velocity is constant and the economy’s output of goods and services rises by 5% each year The nominal gross domestic product will increase while the price level will decline. This is due to the stretching of economic principles that are done in order to create a balance. The central bank will keep the supply of money constant though it will not supply up to the central bank reserves because the economy will generate some surplus for survival (Lipsey and Chrystal, 2007). iii. Central bank money supply to set inflation of 10% Inflation refers to the rise in the price of a product or service over a particular period. Period = 1 year Gross domestic product = 500000000000 (500000000000/x-1) = 10 % = 4.9 trillion Euros 2. Changes in bank regulations to expand availability of credit cards in order to hold less cash i. The demand for money will rise, as people will always feel that they lack money because they cannot access it always. An individual will always strive to look for more cash once he or she cannot physically feel it in the pocket. ii. The price level will rise since the average prices of goods and services will increase due to the availability of liquid cash. The liquid cash always makes the consumers to spend carelessly because they will buy goods that were not included at home their budget (Lipsey and Chrystal, 2007). iii. When the government wants to keep the price level stable, it should make the credit cards available. This will create the idea of saving in the minds of consumer who will be cautious in their spending. The central bank reserves will therefore not be at any risk as the consumers will always be able to access loans according to their savings and do something constructive that will generate abnormal profits. 3. Concept of hyperinflation and the central bank Hyperinflation refers to the situation whereby the inflation is great that it cannot be controlled thus leading to economic constraints. This situation is dangerous because it can make a country to operate in losses that can hardly be recovered. Due to this the stability of a country will decline since there will be no economic progress from investments. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the government because there are rules and regulations that will always protect the central bank reserves from being exploited. The central bank reserves are the driving force of an economy and they should always balance with the capital that circulates in the business parameters such as markets and great investments (Lipsey and Chrystal, 2007). Reference Lipsey, R. and Chrystal, K. (2007). Economics. Oxford: Oxford University Press. Read More