Comparing to the unemployment rate (10%) after 2008’s recession, US is now reaching a relatively low unemployment rate. A low unemployment rate is one of the four macroeconomic objectives that economists always want their nations to achieve. Unemployment is simply defined as the state of being out of work, seeking for a job but unable to find a job. The author stated that US employers added more work opportunities to their payrolls. The job growth in the last year reduces the unemployed people and “maintain low unemployment once the labor market …show more content…
The decrease in real output left out a contractionary gap. Firms need to reduce their output and fire workers to meet the economy’s decreased aggregate demand. Assuming Point D is US’s economy after 2008. From the graph, the inflation rate R4 is negative at the same time the unemployment is as high as r4. After 2010, under the government's expansionary policies and other interventions, the US’s economy started to return. The unemployment rate decreased annually. So from the short-run Philips curve above, it could represent a movement from D to left along the curve.AS the unemployment rate decreases, US’s inflation rate increases.Without the 2008’s recession, the inflation rate might reach as high as R1. A very high inflation decreases the value of money, which is bad for the economy. A desirable inflation rate is around 2%-5%. In the last decade, 2008’s recession plays a role of cushion for government’s expansionary policies. It prevents the US to have a huge inflation which can also cause other economic issues to the …show more content…
Before the decreases in the unemployment rate, US is producing far away from the Full employment point (Yfe). But as unemployment rate decrease and AD increases,it is now producing at Y2, which is closer the full employment. As a response to the increased aggregate demand, US’s output also increases. US’s economy is now producing at a more efficient level. A nation with a low level of unemployment is achieving its own production possibilities. To the government, low unemployment would decrease their spending on unemployment benefits. Because most of the workers have their own job. Moreover, the tax revenue also increases because more people get their jobs. Governors could use those saving on unemployment benefits and revenues collect from workers on capital expenditures. For example transportation development. Investment on new technology. These government spending brings many benefits to the society and could cause economic growth to the nation.
In order for US’s economy to achieve full employment, there are several things that the government could do to improve the labor market. In the article, the author mentioned that 8.7% of part-time employed people are unable to find a full-time job that they want. This group of people is considered as frictional unemployed workers. The percentage of frictional unemployment rate shows that the labor market in the US is inefficient.