Unemployment : Economics

Topics: Unemployment, Economics, Adam Smith Pages: 2 (487 words) Published: December 9, 2013

In macroeconomics, there are two major approaches used to solve problems that arise. The first approach is referred to as the Classical approach; the second is known as the Keynesian approach. This paper will compare and contrast how each approach’s theory would approach the unemployment rate dilemma in the economy. Unemployment is a macroeconomic phenomenon that directly affects people. When a member of a family is unemployed, the family feels it in lost income and a reduced standard of living, because most people rely on their income to maintain their standard of living, the loss of a job will often directly threaten to reduce that standard of living. In terms of society, unemployment is harmful as well. Unemployed workers represent wasted production capability. This means that the economy is putting out less goods and services than it could be producing in other words the economy is working inefficiently. This also means that there is less money being spent by consumers, which ultimately has the potential to lead to a higher unemployment rate, beginning a never-ending cycle. However, generally speaking while unemployment is harmful for individuals, there are some circumstances in which unemployment is both natural and beneficial for the economy as a whole. The national unemployment rate is defined as the percentage of unemployed workers in the total labor force. A closely watched economic indicator, the unemployment rate attracts a huge deal of media attention, especially during economic crisis such as recessions. The United States has been suffering from what seems like a never-ending global economic crisis better known as 2007The Great Recession. According to the U.S. Bureau of Labor Statistics (2010) 9.9% of Americans were without a job, which is a huge jump from 2007 unemployment rate, which was only 4.4%, within a three stretch the unemployment rate increased by 5.5% after the recession was declared over. Generally, employment rises during episodes of...
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