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Economics Questions Thread
NomotivationF:
--- Quote from: Jmac02 on October 11, 2019, 07:05:05 pm ---Hey all,
Can anyone please help me with this?
"Provide one possible explanation for the full employment rate of unemployment falling below 5%?"
My guess is it has to do with increasing the productivity and efficiency of the labour force.
Thanks :)
--- End quote ---
Ahh you can use a looooot of stuff here to be honest, but it really depends on how many marks the question is worth, as it may hint to whether it wants you to talk about AD factors that have led to the unemployment rate falling below 5%, or the casualisation of the workforce.
Here is what I would say if it was asking for both.
In recent economic times, the RBA has lowered the cash rate from 1.50% to 0.75%, with the most recent rate cut being in October 2019. This cash rate cut aims to lower the interest rate and increase aggregate demand through one of the five transmission mechanisms. In terms of the cash flow transmission mechanism, lowering the cash rate would mean consumers/businesses with existing variable loans would experience an increase in their discretionary income, due to having to pay lower rates of interest on their loans. If businesses or consumers choose to spend this newfound income, there may be an increase in private consumption expenditure (c) and/or investment expenditure (I), and thus an increase in AD. As firms increase their production to meet the increasing consumer demand, they will create a greater derived demand for labour, which may have contributed to the increase in employment and the lowering of the unemployment rate. However, although the unemployment rate has been steadily decreasing, the underemployment (members of the labour force that are currently employed but would like to work more hours) rate has been increasing. This may be due to the increasing casualisation of the workforce which involves an increasing amount of part-time and causal workers being hired to full time workers. Although this does still result in a reduction in the unemployment rate, the underemployment rate has been increasing.
Loren_T:
--- Quote from: Jmac02 on October 11, 2019, 07:05:05 pm ---Hey all,
Can anyone please help me with this?
"Provide one possible explanation for the full employment rate of unemployment falling below 5%?"
My guess is it has to do with increasing the productivity and efficiency of the labour force.
Thanks :)
--- End quote ---
hi- im just having a go at answering a question for once here ;D
the goal of full employment is to have an unemployment rate of 5% of the labour force...
I guess if the rate of individuals who are unemployed becomes lower than 5%, that indicates that the demand for labour has increased. This could be caused by an aggregate demand side policy (or budgetary policy), such as high government spending on training and education. This policy would boost the productivity of the labour force, thus expanding the production possibility frontier. In response, firms will make job vacancies which can be more easily entered into by individuals who are able and willing to work, as high spending on training and education enhances the skill set of the labour force.
Jmac02:
Thanks very much, everyone, this helped a lot! :D
Loren_T:
No probs (hope I made sense :o)
you could choose any favourable AD side factor from the budgetary or monetary policy and explain how it would lead to increased employment and participation rate, therefore stimulating a boom in the economy, where unemployment is low and inflation and GDP rises.
Jmac02:
Hey everyone,
I'm struggling to understand the concept and definition of net primary income and why we are in such a deficit?
My guess is because many countries running a CAS (current account surplus) invest in Australia, this results in an increase in the CAFA surplus, whilst causing income debits from said investment to pay dividends and profits to overseas owners, leading to a decrease in net primary income.
Any help would be great, thanks.
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