Unemployment and Its Impact on the Economic System

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This essay will analyze unemployment and the impact it has on the economic system. It will express several of the costs of unemployment and how it can damage the economy. Within this paper, it will clarify whether the CPI is biased, and it could affect interest rates. The manner in which government tax revenue will be distributed and also the way in which GDP is used as a measure to set the price for the living standards.

Even if the job market is believed to be full, there will always be unemployment. To economists, full employment means that unemployment has fallen to the lowest possible level that won’t cause inflation (Bloomberg, 2018). There are several explanations of why unemployment still continues to exist. Many workers are upset or frustrated, and some are unemployed. Frustrated individuals have attempted to get a job and have failed. They tried to find a job, and they had no kind of luck finding it. Such types of employees don’t even have a job, and whenever it comes to the jobs of other laborers, they are often not deemed to have full employment. Much of these laborers or work-seekers are so dissatisfied with the workforce that they do not apply for any employment even if the economy is strong and resources are available to them. Full employment embodies the highest amount of skilled and unskilled labor that can be employed within an economy at any given time (Chappelow, 2019). Some unemployed people may not have the basic qualifications required to get a job. They might be unteachable, or they may not be willing to be qualified for certain work. Many of the jobs currently available may not fall within the requirements of job-seekers and might make them into disgruntled and disappointed job-seekers.

The cost of unemployment is seen in numerous ways, including individual costs, social costs, and even government costs. Because we have a customer-driven economy, companies rely on working-class people. When too many people are out of work, this will result in a reduction in demand. This could be detrimental to companies and could even contribute to further unemployment. Most of the unemployment expenses are individuals who may not have the money to meet their basic necessities. The basic necessities that everybody should have are food, water, housing, and healthcare if they get sick. When they can not provide themselves with these basic needs, they may seek assistance in other ways. The government has taken on the burden of supporting them with these basic needs. The government will help with aspects of what individuals need to have in order to live. The government will help with housing, food, and healthcare, but it won’t be the best that can be provided. At the same time, state and federal governments are no longer collecting the same levels of income tax as before – forcing these governments to borrow money, which defers the costs and impacts of unemployment into the future or cut back on other spending (Simpson, 2019).

The Consumer Price Index or CPI is used to evaluate the overall cost of goods and services such as travel, food, and healthcare. This analyses how the price shifts over a specific period whenever the items are bought. CPI is the most widely watched and used measure of the U.S. inflation rate (Palmer, 2019). CPI is biased whenever it relates to inflation and how it has been evaluated. The CPI doesn’t really factor in the price of the raw materials to make the goods. The CPI is biasing in the sense that prices increase over the years due to an increase in wages. Over the years, price increases seem to be inevitable due to even more money being made by customers. Every year, the CPI will set a standard value for goods, and the resources used to manufacture products will stay around the same cost. CPI has underwent various changes.

According to the Bureau of Labor Statistics (BLS), the changes removed biases that caused the CPI to overstate the inflation rate (Simpson, 2019). Nonetheless, this new process has numerous economists questioning the BLS, suggesting that they’ve been manipulating the index to maintain the stats as low as possible. Overall, the government chooses to pay out as little as necessary due to the trillions in national deficit already accumulated. For these factors, one would say that the CPI, while still being used by numerous people, is a bias source and does not align with other CPI statistics from other institutions.

As the economy grows or thrives, it also indicates that earnings are rising and unemployment rates are declining. Whenever it comes to government tax income and expenditure, it can be a source of revenue that the government uses as a parameter to assess how much tax is added to GDP. Buying products and services would give the government an understanding of how good or poor the economic system is doing. When GDP were to decline, there’d be less products and services for customers to buy. If less products and services are bought, there would be less revenue that the government would be able to collect.

Gross Domestic Product (GDP) is one of the most widely used measures of an economy’s output or production (Picardo, 2019). It is defined as the total value of goods and services produced within a country’s borders in a specific time period — monthly, quarterly or annually (Picardo, 2019). In general, GDP is used to assess the economic success of a country and to calculate its well-being. The method GDP determines the cost of living is by calculating how much products are bought over time. It does not provide an accurate assessment on customers if they grow their crops and generate their own electricity. GDP can only speak for the price of the product and services purchased for that location. The GDP used to indicate the standard of living is inaccurate, and the number may increase or decrease based on the region.

Comprehension of production and cycles within our nation is vital to understanding how economies and policy work proportional to each other. In fact, understanding how government tax revenue and expenditure interact with unemployment allows us to comprehend how our government distributes these revenues. Bad government decisions could lead the economy in the wrong direction for development. The government has a responsibility to ensure that all goods and services are fairly priced and that inflation is appropriately applied.

Cite this paper

Unemployment and Its Impact on the Economic System. (2020, Oct 27). Retrieved from https://samploon.com/unemployment-and-its-impact-on-the-economic-system/

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