Unemployment - Essay Example

Only on StudentShare

Extract of sample

There are two types of policies that an economy can apply to fine tune the economy to achieve required economic growth and employment levels, this include fiscal policies that include government expenditure which affect the IS curve, the other type of policy include the monetary policies which affect the LM curve. These factors include the change in the transaction demand for money, change in speculative demand for money and changes in money supply. There are factors that affect money supply and they include changes in open market operations, change in prices and changes in the reserve ratio.

The IS curve joins together combinations of interest rates and national income at which the commodity market is at equilibrium, this is to say that the equilibrium expenditure equals output. Shifts in the IS curve are attributed to changes in government expenditure and changes in net exports.

From the above discussion the factors that cause a shift in the LM and IS curve can therefore be used by the government and monetary policy makers to improve the state of the economy, those factors that lead to a shift in the LM curve which include money supply, changes in prices and reserve ratios can be used to fine tune the economy to reduce unemployment, also those factors that lead to a shift in the IS curve will also help in reducing unemployment and these factors include government expenditure and exports.

According to Keynes, aggregate demand is equal to consumption plus investment plus government, this can be stated as Y = C + I + G for a closed economy and Y = C + I + G + (X –M) for an open economy, an increase in government expenditure therefore will increase aggregate demand. ...
Download paper


This paper analysis the LM and IS curve model in determining how unemployment in the economy can be reduced, there are two types of policies that an economy can apply to fine tune the economy to achieve required economic growth and employment levels…
Author : rpacocha

Related Essays

The level of unemployment in United Kindgdom
Increased unemployment in a country shows that a country does not use its resources appropriately. It carries momentous social costs in that, unemployed people must habitually depend on benefits for income from other people. Besides, the sense of boredom rejection and failure of being unemployed brings a lot of social consequences to their lives. Recent studies have constantly linked unemployment to deterioration of health and rising suicide and crime rates. The causes of unemployment are diverse and economists differentiate a number of types: structural unemployment is caused by changes in...
13 pages (3263 words) Coursework
The Measurements of Unemployment and Inflation in An Organization
This is so because when a firm is working in a perfectly competitive market where employment rates are high, it is not likely to be possible for such a firm to fix the wage rates. Therefore, in order to fix the wage rates, the organizations need to measure the unemployment rates (Ahuja, 2008). Furthermore, the output and the productivity of a business organization are significantly dependent on the employment as well as unemployment rates. This is because Productivity = Output/Employment and therefore, Employment = Output/Productivity. Hence, it can be stated that the productivity of a...
6 pages (1506 words) Essay
Effects of Rising Economic Role of China on High Levels of Unemployment in the EU and USA
This essay aims to provide an economic outlook for the level of unemployment in the European Union and the United States, in connection with rising levels of their imports of goods and services from China. Effects of globalization have been significant in different regions of the world, both negative and positive. China has for example emerged to be an economic giant while western countries have continued to suffer from high unemployment rates.
4 pages (1004 words) Essay
Discuss why youth unemployment is a particularly serious issue for many countries of the world. Focussing on one specific countr
One of the countries that have experienced this kind of problem is Brazil in which many youths are jobless regardless of the steps they have taken towards ending the problem (Kaestner et al, 2013, p177). The problem has perpetuated increase in the rate of poverty in the country with those people who have no jobs staying inactive and depending on the other people who are working. This has increased poverty levels because people have not been productive in the economy and have depended on the productivity of a few people in the society (Groom, 2013, p1). The analysis of the problems of youth...
6 pages (1506 words) Essay
Rising unemployment does not stops the advance of globalisation
According to Goyal (2006), globalization refers to the integration of the world’s economies through trade, financial flows, and mutual exchanges related to both technology and knowledge. Moreover, it entails free inter- country movement of labour, while, in the developing countries, it entails providing a chance for foreign direct investment through the provision of facilities to foster investment in different economic activities. Prasad, Rogoff, Wei and Kose (2003) contend that globalization has assisted the developing countries to manage the output and consumption volatility in their...
3 pages (753 words) Essay
Phillips Curve and Unemployment
A.W. Phillips (1958) in an article titled, "The relationship between unemployment and the rate of change of money wages in the united kingdom, 1861-1957", captures the dynamic linkage between inflation and unemployment.
6 pages (1506 words) Book Report/Review
presentation ( tasks for unemployment)
th unemployment, there is rise in employment loops, meaning that an individual without a job finds it harder to get one if he or she stays unemployed for long. Unemployment also can be used as a pretext for tax
1 pages (251 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!