Project Paper 2 - Essay Example

Macro & Micro economics of Affiliation QUESTION Describe the possible losses to our society and the economy when people are unemployed. Unemployment is a fundamental life event, which can have devastating influence on people’s lives. It affects both the unemployed and the family members. In addition, the wider community is affected and this leads to the adverse universal economy of a nation, particularly, when the unemployed population is too high. It is imperative to note that, unemployment effects may be long lasting and this is a dangerous situation as it affects the living standards of people.

According to Siurala, (2002), when parents are, either unemployed or they have lost a job; some of the losses include damage of the prospects of the next generation. Additionally, the personal effect of unemployment is loss of valuable productive resources to the economy, which goes down to the rural and regional areas, affecting family businesses through reduction of expenditure. The other loss is attributed to the financial, budgetary and economic issues. The high numbers of people who leave jobs unwillingly do not have the resources for a happy and long retirement benefits.

The environmental factors pus the unemployed to the secondary status of living. These individuals lose their comfortable status in the society. The ultimate effect is the volatile economy, which is sustained by employed minority. Moreover, the unemployed lose or reduce their income and in the long run, the ability to save for the superannuation contributions is lost and consequently disposable income becomes less and less for sustenance (Siurala, 2002). This leads to individual and economic financial loss.

Equally, grief and loss of happiness is attributed to loss of job or unemployment. Most unemployed people suffer from trauma and their lives are full of grief because they are not able to meet their basic needs. In essence, majority of the unemployed face difficulties in meeting the basic needs and sustaining the status of living standards, and this situation makes the overall the economy more volatile. QUESTION 2: Why do teenagers and young people have high unemployment rates? The teenagers and young people have the highest rates of unemployment across the group.

The primary cause of the rising unemployment rates among the teens and youth is the high minimum wage rates. This implies that governmental policies on wages require a certain amount of money to be paid as minimum wage to laborers. In most cases, the youth are unskilled. The employers find it hard to meet the minimum wages for the teens and youth because most of them are unskilled and they do the odd jobs (Jousten & International Monetary Fund, 2008). This resulted to employment of skilled and mostly middle and old age, leaving the youth unemployed.

This is because, it becomes expensive to hire unskilled an inexperienced workers. Another reason for teen unemployment rates involves the search for good paying opportunities. Most teens and youths search for better jobs, which are hard to find because the older people take and hold on these jobs for long time. This situation escalates the suffering of the youth, poor and poorly educated. Moreover, the unemployment rates remain high among the teens and youth due to their concentration in sectors of economy attributed to business cycle fluctuations, which include leisure and hospitality (Family Society of Philadelphia, Family Service Association of America & Conference on Family Life and National Recovery, 2005).

These sectors fare on badly during economic recession and this leaves majority of the youth without employment. However, this situation can be relaxed if the training wage laws are expanded to allow the employers to pay employees less than the minimum wage through training time. Additionally, suspension of minimum wage during economic distress should be permitted to reduce unemployment. QUESTION 3: Describe the difference between the nominal and real exchange rates. What does rising inflation do to a country’s real exchange rate?

The nominal exchange rate refers to the number of units of the domestic currency, which can buy a unit of a particular currency. The nominal rate is denoted by ?. In essence, nominal exchange rate can be illustrated by this equation $1 = Rs.40. On the other hand, the real exchange rate refers to the ratio of the domestic value level and the value level overseas, where the latter is changed into domestic exchange units through nominal exchange rate (Calvo, 2006). In simpler words, real exchange can be defined as the quantity of a good or service in one nation, which can be traded for another good or service in a foreign country.

To comprehend this, consider the following analogy. Assume that the nominal exchange rates between the currencies of USA and India are in the ration 1:40. Then consider the cost of a packet of spaghetti in the US is $2. This implies that a USA resident earning USA dollars, the cost of the cake in India should be RS.80 (Calvo, 2006). Rising of inflation is likely to increase the cost of products (Calvo, 2006). Consider the previous example. If the inflation rate in India is 10% and that of the US is 0%, then cost of Spaghetti in India would be equivalent to Rs. (80 * 1.1) = 88.

This implies that a US resident, who can buy Rs. 80 for $2, cannot purchase the spaghetti for $2. References Calvo, G. A. (2006). Money, exchange rates, and output. Cambridge, Mass: MIT Press. Family Society of Philadelphia, Family Service Association of America. & Conference on Family Life and National Recovery. (2005). The effect of economic unemployment on family life: Report of a committee of the Family Society of Philadelphia. New York, N.Y: Family Welfare Association of America. Jousten, A.

, & International Monetary Fund. (2008). The effects of early retirement on youth unemployment: The case of Belgium. Washington, D.C: International Monetary Fund, Fiscal Affairs Dept. Siurala, L. (2002). Effects of youth unemployment. Helsinki.