Unemployment and Inflation Analysis

Task:

A high unemployment rate in any economy is a symptom of dysfunctionality in the economy. People need income to consume, and consumption leads to production, and production leads to higher demand for labor (employment), so unemployment is a crucial macroeconomic issue that confronts all modern economies. A lower unemployment rate, however, is not the end of the problem. The type of employment and the price of labor (wages) have to be sufficient in order for consumption (which is the major component of GDP) in the economy to be healthy. If wages are low or if the prices in the economy are high, consumption would be low and thus, production and demand for labor would be low, too. High unemployment rate, high part-time employment rate for economic reasons, low wages, and high inflation could have negative effects on economic growth.

Assignment Description

In this assignment, you need to identify two main issues related to unemployment and inflation. Then you are going to study their past trends, provide an overview of their current status, and provide solutions to overcome them. You will use data, articles, experts' opinions, and government reports to draw a clear picture of the current unemployment and inflation issues.

Some areas you might consider are (you could also choose different topics) the following.

· Part-time employment rates for economic reasons

· Unemployment rates among young college graduates

· Unemployment rates by gender

· Unemployment rates among Black and Hispanic communities

· Low supply of labor (professionals) in certain industries

· High supply of labor in education

· Low wages by profession and their causes

· Low demand for labor in some industry (you could choose whatever industry you wish)

· Low wages in some parts of the country

· High unemployment rate among workers with high school diploma or less

· The increase in the price of housing and its effect on investment

· The increase in the price of healthcare and education and their effect on consumption

Your research needs to be structured with consistent and clear thoughts. It also needs to be supported by facts and data. Your results need to be based on solid facts. Your conclusion and recommended solution need to be thorough and based on your findings and understanding of macroeconomic challenges and macroeconomic policies

Your introduction needs to include the following.

o Include a clear definition of unemployment and inflation and how and why they occur and rise in the economy.

o Also provide your understanding of the relationship between economic growth (GDP), high/low unemployment, high/low Inflation, high/low wages, and the way they impact one another.

o Include an overview of the current unemployment and inflation rates in the economy using facts and statics.

o Include a brief description of the two unemployment or inflation-related issues that you are going to address in this paper and their importance. Basically, why do you think they are important to research and resolve?

· Data

o Obtain data from at least five credible sources (not Wikipedia) to provide facts about unemployment, inflation, and wages and their growth pattern and their current status.

o Obtain data about changes in unemployment and inflation rates for a period of 10 years.

o Obtain historical data (10 years or more) about GDP growth rate (percentage) and Real GDP volume (in dollar value).

o Obtain data about the changes in the real wages since the year 2005 (before the recession).

o Obtain historical data (10 years or more) about the two issues you are going to address, as well as data about their current status.

o Use tables, graphs, and figures to support your argument. You can find the latest unemployment and inflation data at www.bls.gov (Bureau of Labor Statistics).

This section needs to contain the following discussions based on the data that was gathered and your understanding of unemployment, inflation, GDP, aggregate supply, and aggregate demand, monetary policy, and fiscal policy.

o Unemployment: Discuss the trends of unemployment rates over the past 10 years and provide your objective analysis of the changes in unemployment and the current rates. Place extra emphasis on the periods where unemployment was either too high or too low (higher or lower than the natural rate of unemployment).

o Inflation: Discuss the trends of inflation rates over the past 10 years and their relationship with GDP growth and decline. Highlight the years that inflation was either higher or lower than usual and state the reason(s). Also state the effect of the high and low rates on GDP.

o Wages: Discuss the changes in real wages by major professions or industries and highlight the periods wages declined or rose and state the reason for this unusual change.

o Two Issues (your choice): Here you will need to discuss the two unemployment or inflation-related issues. Provide an overview of their trends and use facts to highlight the major changes in their trends and their current statuses. State the reason(s) why you believe these two issues represent a challenge for the economy.

· Reflection and Critical Thinking

This section needs to cover the following areas.

o Connect all of the dots together by relating your above analysis to other areas in the macroeconomy. Basically, you will link changes in unemployment, inflation, wages, and GDP to one another and how they impacted each other during periods of economic decline (recessions) and periods of economic growth (expansion).

o Highlight the causes of the two issues that you selected and how they impact the economy negatively and why they do need to be addressed by policy makers.

· Solution

o State which macroeconomic policy (monetary policy or fiscal policy) that might resolve the issues you highlighted above, and state how this policy could be implemented and why it would solve these problems.

Finally, provide your own solution. Basically, answer the following question.

What would you do to solve the macroeconomic issues you addressed if you were in charge of the U.S. economy? State why.