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The Global Economy - Essay Example

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The Global Economy

It has to be noted that the students and other individuals out of the labour force are excluded from the computation.
According to the BLS (2006) there are several constraints that affect the accurate computation of unemployment rate. The agency cited four important considerations that can affect the outcome of such calculation. First, the computation for the unemployment rate is manifested through surveys. Personnel from the BLS queries individuals on their employment status through guidelines presented in the survey. The truthfulness of the gathered data is a concern because some individuals tend to provide false information. Second, the presence of underemployed individuals is an important aspect. Definitely, underemployed individuals can be classified as both employed and unemployed. It is important though to correctly classify their contribution to the employment rate. Third, unprecedented economic events affect unemployment rate. It is critical to identify the different economic circumstances that can instantly change the rate of unemployment. Finally, the instruments used by BLS have to be updated and conform to the new standard that ensures accurate computations. Time changes the situation and logically affects the method in which calculation for the unemployment rate is approached. ...
Are there other constraints in the economy that could add to inflationary pressures Explain.
Aggregate Demand Aggregate Supply Diagram
Inflation Aggregate Demand

5%
3%

Aggregate Supply
According to McTaggart (2003) aggregate supply is defined as the total supply of goods and services by a national economy in a certain figure of time. On the other hand, aggregate demand is the total demand of national economy for a certain period of time. Basic Economics suggests that the increase in price will directly affect supply and adversely affect demand. Thus, in the AD and AS diagram, AD follows a negative scope and AS illustrates a positive slope. All economic activities affect both AS and AD. This reality is important to understand before appraising the effects of all economic circumstances in other aspects.
For the government, having low unemployment rate is a primary goal. Definitely, it is important for all individuals to have quality employment and for those not in the labour force to have ample opportunities to be employed. As the unemployment decreases, it is expected that most households have income. This results to higher demands and will eventually increase AD. The increase in AD generally improves the Gross Domestic Product (GDP) since household consumption will also increase. Also, the income of the government is boosted because taxes in income will increase in the same manner as the taxes imposed on goods and services.
In contrast, it has been noted that the decrease in the unemployment rate will have an effect to inflation. Inflation is defined as the increase in general prices as measured with the baseline of purchasing power. Usually, inflation is caused by the ...Show more

Summary

Based on the process undertaken by the Bureau of Labour and Statistics (BLS) (2006), the first stage is to classify individuals into three categories: employed, unemployed, and out of the labour force. For an individual to belong in a certain category, criteria have to be satisfied…
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The Global Economy essay example
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