Every country in the world is struggling hard to fight this issue.ĭuring the decade of 1930s market economies have experienced a greater economic problem, which has been described as depression or deflationary pressure. Therefore, a new economic thought emerged which is called supply-side economies. This problem could not explain with the Keynesian theory of effective demand (demand-side analysis). It is one of the important macroeconomic issues of the day perhaps the most complex. The term stagflation was coined in the 70s when several developed countries of the world, received a supply shock in terms of capsid hikes in oil prices. The existence of a high rate of unemployment means a reduced level of GNP. Stagflation refers to a situation when a high rate of inflation occurs simultaneously with a high rate of unemployment. Therefore, one of the objectives of the government is to ensure stability at the price level. During inflation, some people gain but most people lose. It refers to a phenomenon of persistent rise in the price level. Inflation or Rising General Price LevelĪnother issue of macroeconomic issues is to explain and analyze the problem of inflation faced by both developed and developing countries. According to him, with the aggregate supply remaining unchanged in the short run, it is the deficiency in aggregate demand that causes unemployment in the economy. Keynes explained that the level of employment and national income is determined by aggregate demand and aggregate supply.
But this did not appear to be so at the time of depression in the thirties.
#DRAWINGS OF ECONOMIX ISSUES FULL#
They thought that with the flexible wage rates and interest rates, unemployment would be automatically removed and full employment established. Thus, the macroeconomic issue is what causes involuntary unemployment.Ĭlassical economists denied that there could be involuntary unemployment of labor and other resources for a long time. So one of the objectives of the government is to ensure full employment, which implies an absence of involuntary unemployment. If this problem exists society’s actual output (GNP) will be less than its potential output. Unemployment refers to the involuntary idleness of resources including labor. The major issue in macroeconomics is to explain what determines the level of employment and national income in an economy.
0 kommentar(er)
