Social Security - Essay Example

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units such as households and firms. Macroeconomics deals with the aggregates, it concentrates on the behavior of all households together, all firms together, total output of all goods and services, movements of the total price level and total employment.
Employment is one of the main areas that macroeconomics is concerned with, because it is one of the determining factors in a nation's growth…
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Social Security
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Download file to see previous pages Full employment does not mean zero unemployment but means a situation where an economy experiences only structural and frictional unemployment and an absence of cyclical unemployment. This is because structural and frictional unemployment are considered unavoidable and work positively to some extent too. The rate associated with full employment is known as the full-employment rate of unemployment or as the natural rate of unemployment (NRU) and is considered to be consistent with a level of unemployment that predominantly comprises voluntarily unemployed workers.1
An economy at its natural rate of unemployment is said to be producing a non-inflationary potential output.2 Zero unemployment is not a desired state, because at this level inflationary pressures start to build in form of rising wages. This increases costs, which are in turn passed on to customers as higher prices, and this leads to inflation.
Unemployment is an excess amount of labor on the labor market. An unemployed person is defined as one who is willing to work but is out of work. The unemployment rate is the number of unemployed workers divided by the civilian labor force, this includes both the unemployed and those with jobs.
Frictional unemployment is unemployment which results from people moving between jobs and new workers entering the labor force.3 Frictional unemployment refers to workers who are searching for jobs and those that are waiting to work in the near future. A certain amount of frictional unemployment is unavoidable and inevitable, however this type of unemployment can be reduced to some extent by providing better information about job opportunities and availability of workers.
Structural Unemployment
Structural unemployment is more likely to be a longer term phenomenon than frictional unemployment and consequently have a greater impact.
2 Barbiero Thomas, Brue Stanley and McConnell Campbell. Macroeconomics: McGraw-Hill Ryerson Limited, (2002): 160
3 James, Elijah M. Macroeconomics: A Problem Solving Approach. Prentice Hall Canada Inc. (1997): 419
Structural Unemployment is caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs. It is the type of unemployment that arises when there is a decline in the number of jobs available in a particular region or industry, and this is caused by changes in the demand pattern of consumers. If there is a permanent decline in the demand for
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