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البطالة و التضخم Unemployment and Inflation

الجزء الخامس. البطالة و التضخم Unemployment and Inflation. د.إقبال الرحماني 2001. Real GDP growth. Boom. Recession. Recovery. Depression. Time. Unemployment .

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البطالة و التضخم Unemployment and Inflation

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  1. الجزء الخامس البطالة و التضخم Unemployment and Inflation د.إقبال الرحماني 2001

  2. Real GDP growth Boom Recession Recovery Depression Time Unemployment Recall that unemployment is an economic and social phenomenon that occurs and increases mainly during periods of recessions and depressions of the business cycle. Q: What causes the fluctuations in the business cycle?

  3. Types of unemployment: 1- Seasonal unemployment: A product of regular and recurring changes in hiring of certain fields on a seasonal basis . ( بطالة موسمية) 2- Frictional unemployment: A product of the short-term movement of workers between jobs & of first time job seekers. (بطالة إحتكاكية)

  4. 3-Structural unemployment: A product of technological changes and other changes in the structure of the economy. ( بطالة هيكلية) 4- Cyclical unemployment: A product of the down side of the business cycle. (بطالة دورية) Q-1: What is disguised unemployment, behavioral unemployment, and imported unemployment? Q-2: What are the main types of unemployment exit in the Kuwait?

  5. Note:Frictional unemployment is short term; while structural unemployment can be long term. Note:Full-employment in economics does not mean zero unemployment. That is why some economist use the term Natural rate of unemployment. Natural rate of unemployment: the unemployment rate that would exist when cyclical unemployment = zero Q: Who is more likely be unemployed among the different educational levels, age groups, sex and race?

  6. Q: What are the costs of unemployment? 1- lower standards of living and status (social unrest). 2- Lower GDP. GDP Gap = Potential GDP - Actual GDP Okun’s Law: For each 1% which the actual unemployment exceeds the natural rate of unemployment, a GDP gap of 2% occurs. Q: What is the effect of increasing unemployment on the government budget ?

  7. Lines of unemployed Americans waiting to receive subsidies (unemployment benefit) during the time of the Great depression.

  8. Unemployment rate = number of unemployed X 100 number of the labor force Measure of Unemployment: Q-1: Who are the unemployed ? A: those who are actively seeking work and can not find any job at the average wage. Note : unemployment rate does not include discouraged workers.

  9. Outside the Labor force Labor force Total population Q-2:What is meant by thelabor force(قوة العمل)? A:The labor force includes those who are working and those who are unemployed and seeking employment Note: Total population : Population under age 16 House care takers + students + retired + disabled Employed Unemployed

  10. then Unemployment rate = 2209 X 100 = 1.1% 206190 Example: according to 1998 statistics of Kuwait, calculate the unemployment rate Outside the labor force 435695 Employed + unemployed 206190 Unemployed 2209

  11. Note: Dependency ratio = population < 15 years + population > 60(5) Population at age 15 - 60 (5) ملاحظة: معدل البطالة في الكويت مازال يعد منخفضا ولكن المشكلة الأساسية تتعلق بإختلالات في قوة العمل وسوق العمل وفي التركيبة السكانية. المجتمع السكاني الكويتى فتيYoung Population )السكان < 15 سنة يمثلون حوالي 42 % من مجمل السكان) . بالإضافة الى ارتفاع معدل الخصوبة Fertility rate مما يؤدي الى ارتفاع معدل الإعالة Dependency Ratio.

  12. قوة العمل قوة العمل الكويتية الوافدة 18.85 81.15 اختلال سوق العمل في الكويت نسبة الكويتيين الى اجمالى قوة العمل

  13. أنشطة تجارة خدمات سلعية 1.30 إنتاجية 7.67 5.62 خدمات اجتماعية وشخصية 85.40 اختلال سوق العمل (قوة العمل الكويتية) حسب النشاط الاقتصادى

  14. خاص ومشترك 6.80 93.20 حكومي اختلال سوق العمل (قوة العمل الكويتية) حسب قطاع العمل

  15. علمية وفنية 8.44 أخرى مدرسون 24.60 13.48 مديرون 20.41 ومشرفون 33.08 كتبة اختلال سوق العمل (قوة العمل الكويتية) التوزيع المهنى

  16. 5% 22.9% 38.4% 33.7% ملاحظة: نسبة حملة المؤهلات العليا من الذكور= 15.2% من مجمل الذكور بقوة العمل ، و الإناث 36.9% من مجمل الإناث

  17. Inflation Recall that keeping a stable general price level is one of the main macroeconomic goals. The price level is the average level of all prices in the economy. Inflation is a sustained rise in the average level of prices (general price level). Note: inflation is generally classified into two types: Hyper inflation & creeping inflation

  18. PI for a certain year - PI for a comparative year X 100 PI for a comparative year Measure of inflation: Recall that the price index(PI) is a measure of changes in the average price level. Q|: How is the price index measured ? Inflation rate =

  19. 1) Inflation rate (1995-97) = (120 - 100) X 100 = 20 % 100 2) Inflation rate (1997-2000) = (123 - 120) X 100 = 2.5 % 120 Example : Year Price index 1995 100 1996 110 1997 120 2000 123 Calculate inflation rate between (1995-97) and (1997-2000)

  20. Real historical example, Germany 1914-1924: Year Price index 1914 100 1918 204 1920 1260 1922 3670 1923 278500 1924 117,320,000,000,000

  21. 1- Impact on income: if nominal income does not increase, it means a lower purchasing power. Hence, real income will be lower. 2- Impact on income distribution: redistribution of income from fixed income groups to unfixed income groups. Effects of inflation: Note 1: Recall, Real income = (nominal income / PI) X 100 Note 2:purchasing power= real value of one unit of money ( $1)= ( $1 / price index) X 100

  22. 3- Impact on creditors & debtors: if inflation rate is higher than nominal interest rate; then there will be a redistribution of income from creditors to debtors. 4- Impact on balance of trade: if inflation rate in the economy is higher than rates in other countries; this will increase imports and reduce exports, leading to a deficit in the balance of trade. Effects of inflation: Note :Real interest rate = nominal interest rate - inflation rate

  23. 1- Demand-pull inflation: inflation caused by increasing aggregate demand for output. “Too many dollars chasing too few goods”. More likely to occur when the economy is operating near its potential output. Types of inflation: (according to the source of inflationary pressure)

  24. AS (LR) p3 P AS(SR) e AD3 Y p2 AD Q f Y Recall! When the economy is operating near full employment, any increase in AD will lead only to an increase in prices. p1 AD2

  25. 2- Cost-push inflation: inflation caused by rising costs of production. “profit -push” vs. “wages- push”!. Could occur at different levels of output. Types of inflation: Q-1: What is meant by imported inflation? Q-2: What is meant by stagflation?

  26. Inflation rate (wage rate) F1 F2 U1 U2 Unemployment rate Phillips Curve In 1958, A.W. Phillips , a New Zealand economist, found that there is an inverse relationship between the unemployment rate and the rate of change in wages in England during the period 1826 to 1957. Later early studies confirmed an inverse relationship between unemployment and inflation rate. This relation became known as Phillips Curve.

  27. LR Phillips Curve Inflation rate Unemployment rate Q:Is there a trade off between unemployment and inflation rate? Most economists believe that the inverse relationship between inflation and unemployment rate is just a short-term phenomena. SR3 SR2 SR1

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