“Unemployment and Inflation”

 > Explanatory Article by Marios Kyriakou, MSc Economics


About the author: Marios Kyriakou has a bachelor’s degree in Economics from the University of Cyprus and a master’s degree in Economics from the University of Warwick. He is also a holder of CySEC’s Advanced Certificate in Financial Services Legal Framework and a professional in Online Trading, Forex and CFDs with more than 7 years of experience.

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<Last updated 11.04.2020>

Dear reader,

Hi! If you are interested in Economics, I’ve prepared the below to help your understanding of the important primary economic indicators. You should take a look at this short article in which I discuss about Unemployment and Inflation.

The labor force, or currently active population, comprises all persons who fulfill the requirements for inclusion among the employed. These people can and want to work.

Unemployment: The situation in which people are jobless, but actively seeking work, and are available to take a job.

The official unemployment rate for the nation is the number of unemployed as a percentage of the labor force. Persons who are neither employed nor unemployed are not in the labor force.

Labor Force = persons in employment + persons in unemployment

> Persons in Unemployment: members of the labor force who can, are willing and are available to work > they can’t find a job. During periods of recession, an economy usually experiences a relatively high unemployment rate.

Frictional unemployment is the unemployment that results from time spent between jobs when a worker is searching for or transitioning from one job to another. Some graduates are looking for a job, some are looking for better opportunities etc.

In summary is very important to understand that for someone to be officially marked as unemployed:

> The person must want to work.

> The person must be available to work, to be capable to work.

> The person must actively searching for work.

Unemployment rate = (Unemployed / Labor Force)  x 100  = X %

The Unemployment rate might differ from period to period, a 2-5 % s considered to be normal.

There are both social and economic consequences of unemployment:

> Loss of human resources in the production process.

> Loss of income for the individual and his/her family resulting in lower living standard.

> Unwanted social phenomena such as crime, divorces etc.

> Worsens the government budget deficit due to the provision of unemployment benefits.

Inflation is another economic indicator, is the rate at which the general level of prices for goods and services is rising. While prices increase the purchasing power of the currency is falling. For some goods and services prices increase, while for other might decrease or stay the same. A quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time. It is the rise in the general level of prices, when a unit of currency effectively buys less than it did in prior periods. Often expressed as a percentage, inflation thus indicates a decrease in the purchasing power of a nation’s currency.

Deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. This allows one to buy more goods and services than before with the same amount of currency.

GDP, Unemployment Rate and Inflation are considered the most important economic indicators.


 

“I hope I am clear on this one. If not, contact us on social media and we will do our best to help you.

Thank you for reading my articles and watching my videos.”

Marios Kyriakou

References:
Ιωάννου-Σεργίου Μ., Μάτση Μ., Σάββα Ν., Σταύρου-Παπαδοπούλου Λ., Οικονομικά Α’ Λυκείου, Α΄ Έκδοση 2016. Υπηρεσία Ανάπτυξης Προγραμμάτων, Κύπρος.
Βλαδιμήρου-Παναγιώτου Β. και Κουζαλή-Σωτηρίου Ε., Οικονομικά Β’ Λυκείου, Κύπρος, Α΄ Έκδοση 2016.  Υπηρεσία Ανάπτυξης Προγραμμάτων, Κύπρος.
Βλαδιμήρου-Παναγιώτου Β. και Κουζαλή-Σωτηρίου Ε., Οικονομικά Γ’ Λυκείου, Κύπρος, Α΄ Έκδοση 2017.  Υπηρεσία Ανάπτυξης Προγραμμάτων, Κύπρος.
Besanko, David Braeutigam, Ronald R. Gibbs, Michael, 2011, Microeconomics, Hoboken: John Wiley, 4th ed,
International student version
Frank, Robert H., 2010, Microeconomics and Behavior, New York: McGraw-Hill Irwin, 8th ed.
Estrin, Saul Laidler, David E. W. Dietrich, Michael ., 2008, Microeconomics, Harlow: FT/ Prentice Hall, 5th ed.

Disclaimer: This article is intended for educational purposes only and does not replace independent professional judgement. Its purpose is to act as a complementary educational service to society, promoting personal development and social, economic and cultural progress of citizens. While this content has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the creator to the accuracy or completeness of the information presented or any other written or oral information made available to any interested party and any such liability is expressly disclaimed.

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