The first published use of the term "macroeconomics" was by

the Norwegian Economist Ragnar Frisch in 1933 and before this,

there already was an effort to understand many of the broad elements
of the field.

Ragnar Frisch
DEFINATION OF MACROECONOMICS:
Macroeconomics is a branch of economics that deals with the
performance, structure and behavior of a national or a regional
economy as a whole. Since the 1930s economists have split their
economics into two parts.
Economics is divided into two main divisions
• Microeconomics
• Macroeconomics

MICROECONOMICS :
 Microeconomics is primarily focused on the actions of
individual agents, such as firms and consumers, and how their
behavior determines prices and quantities in specific markets.
Microeconomics focuses on the “What?" and "For Whom?"
questions. It examines how a society decides to produce the bundle
of goods and services it does (the "what" question), and who gets
these goods and services (the "for whom" question). It explores how
various systems of incentives and ways of making decisions (such as
"dollar voting" or various forms of political voting) work to solve
the "what" and "for whom" questions. Central in much of this
examination is the concept of economic efficiency.

MACROECONOMICS:-
Macroeconomics deals with topics of inflation and
unemployment. Macroeconomists study aggregated indicators such
as GDP, unemployment rates and price indices to understand how
the whole economy functions. Macroeconomists develop models
that explain the relationship between such factors as national
income, output, consumption, unemployment, inflation, savings,
investments, international trade and international finance.
Macroeconomics is a broad field of study, however, there are
two major areas of research in Macroeconomics:
The attempt to understand the causes and consequences of short-
run fluctuations in national income (the business cycle).
The attempt to understand the determinants of long-run economic
growth (increases in national income).
Macroeconomic models and their forecasts are used by both
governments and large corporations to assist in the
development and evaluation of economic policy and business strategy
DEFINATION:
Unemployment is the state in which a person is without work,
available to work, and is currently seeking work. It is a situation
where there is non-availability of job for the persons. Its is an
situation in which a person who is physically capable, mentally
willing to work at existing wage rate does not find any job and is
forced to remain unemployed.

INTRODUCTION:
 It involves a waste of human resource and results in many social
evils like theft, pick- pocketing, robbery, murder etc. It’s a serious
economic, social and political problem of the country. It’s a cause as
well as effect of poverty. The unemployment rate is used in economic
studies. Rate is determined as the percentage of those in the labor
force without jobs.
There are a variety of different causes of unemployment, and
disagreement on which causes are most important. Different schools
of economic thought suggest different policies to address
unemployment. Monetarists for example, believe that controlling
inflation to facilitate growth and investment is more important, and
will lead to increased employment in the long run. Keynesians on the
other hand emphasize the smoothing out of business cycles by
manipulating aggregate demand.
There is also disagreement on how exactly to measure
unemployment. For example, the conservative government, when in
power in the United Kingdom, changed the way in which employment
was measured several times. Each time, the figure reduced (Social
Trends). Different countries experience different levels of
unemployment; the USA currently experiences lower unemployment
levels than the European Union, and it also changes over time (e.g.
the Great depression) throughout economic cycles.
Unemployment rates in the United States (1950 –
2005)
 VOLUNTARY UNEMPLOYMENT:
There are some persons in a society who for various reasons
prefer to remain jobless even though there are possibilities of getting
job; some have the desire to have jobs only of their liking or giving
better remuneration than that in the earlier jobs and therefore they
prefer to remain unemployed. Such a kind of unemployment is
referred to as VOLUNTARY UNEMPLOYMENT

 InVOLUNTARY UNEMPLOYMENT:
Involuntary unemployment is a situation where a person is
physically and mentally fit to work and also willing to work at
existing wage rate, but does not get a job. He is forced to remain idle
even if he is willing to work.

Voluntary And Involuntary Unemployment

 RURAL UNEMPLOYMENT:
This kind of employment prevails ion rural areas. The nature of
problem is also complicated. There are only two types of
unemployment commonly found in agricultural economy e.g. India

A) SEASONAL UNEMPLOYMENT:
A)SEASONAL
In an agrarian economy like India, seasonal unemployment is the
most significant type of unemployment in rural sector. Agriculture
labour in India is mostly dependent on monsoon.
B)
B)DISGUISED UNEMPLOYMENT:
In the rural subsistence agrarian sector of the Indian economy,
the problem of disguised unemployment is also typical. Disguised
unemployment refers to that type of unemployment in which laborers
appear to be working and employed but in reality, they are not
employed as they do not add to the total output. In other words they
are removed from their jobs, output would not decrease.

 URBAN UNEMPLOYMENT:
This type of unemployment is found in urban areas i.e. towns and
cities.

1) Industrial Unemployment:
This refers to unemployment amongst workers in industries
and factories in urban areas. Industrial workers may be skilled or
unskilled. Industrial is open unemployment.

2) Educated Unemployment:
It is the problem of educated middle class people of urban
society. It means joblessness amongst the graduates, post graduates,
doctors, engineers etc. However this type of unemployment does not
exist in countries world wide. This are specific type of unemployment
that exist only in few countries especially those in involved in
agricultural activities like India. Economists distinguish between five
major types of unemployment, i.e., cyclical, frictional, structural and
classical. Real-world unemployment may combine different types,
while all four might exist at one time.
 CYCLICAL UNEMPLOYMENT:
This type of unemployment exists due to inadequate effective
aggregate demand. It gets its name because it varies with the
business cycle, though it can also be persistent, as during the Great
Depression of the 1930s. Gross domestic product is not as high as
potential output because of demand failure, due to (say) pessimistic
business expectations which discourages private fixed investment
spending. Low government spending or high taxes, under
consumption, or low (or negative) net exports may also have this
result. Some consider this type of unemployment one type of
frictional unemployment in which factors causing the friction are
partially caused by some cyclical variables. For example, a surprise
decrease in the money supply may shock participants in society.
Then, we may see recession and cyclical unemployment until
expectations adjust to the new conditions. In this case, the number
of unemployed workers exceeds the number of job vacancies, so
that if even all open jobs were filled, some workers would remain
unemployed. This kind of unemployment coincides with unused
industrial capacity (unemployed capital goods).
Classical economics rejects the conception of cyclical
unemployment, seeing the attainment of full employment of
resources and potential output as the normal state of affairs.
However, it accepts the theory to some extent as full employment
can never be reached.

 FRICTIONAL UNEMPLOYMENT:
This unemployment involves people in the midst of transiting
between jobs, searching for new ones; it is compatible with full
employment. It is sometimes called search unemployment and can
be voluntary. New entrants (such as graduating students) and re-
entrants (such as former homemakers) can also suffer a spell of
frictional unemployment.
Frictional unemployment exists because both jobs and workers
are heterogeneous, and a mismatch can result between the
characteristics of supply and demand. Such a mismatch can be
related to skills, payment, work time, location, attitude, taste, and a
multitude of other factors. Workers as well as employers accept a
certain level of imperfection, risk or compromise, but usually not
right away; they will invest some time and effort to find a better
match. This is in fact beneficial to the economy since it results in a
better allocation of resources. However, if the search takes too long
and mismatches are too frequent, the economy suffers, since some
work will not get done. Therefore, governments will seek ways to
reduce unnecessary frictional unemployment.
Frictional unemployment coincides with an equal number of
vacancies. Numerically, it is therefore maximal when the labour
market is in equilibrium. When for instance demand far exceeds
supply, the frictionally unemployed will be few as they will get many
job offers.
 STRUCTURAL UNEMPLOYMENT:
Unemployment which occurs due to fundamental changes in
the structure of economy, is called structural unemployment.
Mainly these are the changes in population, government policies,
technology etc. Generally, it is found in developing economies. Its is
chronic unemployment. It is long term phenomena.

 CLASSICAL UNEMPLOYMENT:
In this case, like that of cyclical unemployment, the number of
job-seekers exceeds the number of vacancies. However, the
problem here is not aggregate demand failure. In this situation,
real wages are higher than the market-equilibrium wage. In simple
terms, institutions such as "the minimum wage" deter employers
from hiring all of the available workers, because the cost would
exceed the technologically-determined benefit of hiring them (the
marginal product of labour). Some economists theorize that this
type of unemployment can be reduced by increasing the flexibility
of wages (e.g., abolishing minimum wages or employee
protection), to make the labor market more like a financial market.
  HIDDEN UNEMPLOYMENT:
Hidden, or covered, unemployment is the unemployment of
potential workers that is not reflected in official unemployment
statistics, due to the way the statistics are collected. In many
countries only those who have no work but are actively looking for
work (and/or qualifying for social security benefits) are counted as
unemployed. Those who have given up looking for work (and
sometimes those who are on Government "retraining"
programmes) are not officially counted among the unemployed,
even though they are not employed. The same applies to those who
have taken early retirement to avoid being laid off, but would prefer
to be working. The statistic also does not count the
"underemployed" - those with part time or seasonal jobs who would
rather have full time jobs. Because of hidden unemployment,
official statistics often underestimate unemployment rates.
 Unemployment levels are increasing dramatically in many parts
of the world. There is considerable debate among economists as to
the causes of unemployment. Keynesian economics emphasizes
unemployment resulting from insufficient effective demand for
goods and service in the economy. Others point to structural
problems, inefficiencies, inherent in labour markets. Classical
economics tends to reject these explanations, and focuses more on
rigidities imposed on the labor market from the outside, such as
minimum wage laws, taxes, and other regulations that may
discourage the hiring of workers.
In the set up of a modern market economy, there are many
factors, which contribute to unemployment. Causes of unemployment
are varied and it may be due to the following factors:

 Rapid changes in technology

 Recessions

 Inflation
 Disability

 Undulating business cycles

 Changes in tastes as well as alterations in the climatic
conditions. This may in turn lead to decline in demand for
certain services as well as products.

 Attitude towards employers

 Willingness to work

 Perception of employees
 Employee values
 Discriminating factors in the place of work (may include
discrimination on the basis of age, class, ethnicity, color and
race).
 Ability to look for employment

 Population
 Unemployment has obvious and well-documented links to
economic disadvantage and has also been connected in some
discussion to higher crime rates especially among the young suicide,
and homicide Garry Ottosen and Douglas Thompson (1996) broaden
the consequences of unemployment, relating it to increases in the
incidences of alcoholism, child abuse, family breakdown, psychiatric
hospitalization, and a variety of physical complaints and illnesses.
Some researchers have emphasized the importance of preventing
youth from falling into unemployment traps. Robert Gitter and
Markus Scheuer (1997) suggest that unemployment among youth not
only causes current hardship, but may also hinder future economic
success. This is because unemployed youths are not able to gain
experience and on-the-job training and because a history of
joblessness signals that the individual may not have the qualities that
are valued in the labour market.

Attempts have, however, been made to estimate the economic cost

associated with unemployment. Ottosen and Thompson (1996, p.5)
noted that "the United States loses a little less than one percentage
point of potential gross domestic product (GDP) or output for each
one percentage point of unemployment. This implies that an
unemployment rate of 7 percent costs the United States at least $400
billion annually in foregone output. This is more than $2,000 for
every man, woman, and child over 16 years of age." Similarly, in
Australia, Peter Kenyon (1998) calculated that the loss of GDP
associated with an unemployment rate above the full-employment
rate is the equivalent of one year's worth of GDP over the past two
decades.

In addition to the loss of GDP, high unemployment increases the

burden on social welfare programs. These include unemployment
insurance programs and other types of welfare, such as food stamps,
Medicaid, Medicare, and Supplemental Security Income (Ottosen
and Thompson 1996). There are also intergenerational effects, as
unemployment of parents will limit their capacity to finance the
schooling of their children. As education is the primary means of
social mobility, this intergenerational effect will give rise to an
inheritance of inequality.

Unemployment rates
 region Unemployment region Unemploymen
rate t rate

North America Middle East

Canada 6.8 Israel 8.8

United Sates 4.0 Turkey 7.3

United Arab
South/Central America 2.3
Emirates

Argentina 15.0 Africa

Chile 8.3 Egypt 8.1

Colombia 20.5 Suriname 14.0

Costa Rica 5.2 Algeria 29.8

Peru 7.4 Tunisia 15.6

Europe Asia
 Korea, Republic
France 9.6 4.1
of

Germany 7.9 Japan 4.7

Italy 10.5 Philippines 10.1

Netherlands 3.3 Singapore 4.4

Sweden 4.7 Sri Lanka 8.0

United Kingdom 5.5 Thailand 2.4

Eastern Europe Oceania

Bulgaria 16.4 Australia 6.6

Czech Republic 8.3 New Zealand 6.0

Hungary 6.4
 Poland 16.1

Romania 7.1

To many economists, persistent unemployment is a sign of

market failure because unemployment is a waste of scarce resources
and leads to a loss of potential output and a reduction in allocative
efficiency. The economy is operating below the maximum output it
could achieve. This might be illustrated by making use of a PPF or
using the concept of the output gap.
.

Unemployment Rate by State: 2003, 2004, and

2005

Country 2003 2004 2005

United States 6.0% 5.5% 5.1%
Alabama 5.8 5.6 4.0
Alaska 7.7 7.5 6.8
Arizona 5.7 5.0 4.7
Arkansas 5.9 5.7 4.9
California 6.8 6.2 5.4
Colorado 6.2 5.5 5.0
Connecticut 5.5 4.9 4.9
Delaware 4.0 4.1 4.2
District of
7.2 8.2 6.5
Columbia
Florida 5.3 4.8 3.8
Georgia 4.7 4.6 5.3
Hawaii 3.9 3.3 2.8
Idaho 5.3 4.7 3.8
Illinois 6.7 6.2 5.7
Indiana 5.3 5.2 5.4
Iowa 4.4 4.8 4.6
Kansas 5.6% 5.5% 5.1%
Kentucky 6.2 5.3 6.1
Louisiana 6.3 5.7 7.1
Maine 5.0 4.6 4.8
Maryland 4.5 4.2 4.1
Massachusetts 5.8 5.1 4.8
Michigan 7.1 7.1 6.7
Minnesota 4.9 4.7 4.0
Mississippi 6.4 6.2 7.9
Missouri 5.6 5.7 5.4
Montana 4.4 4.4 4.0
Nebraska 4.0 3.8 3.8
Nevada 5.1 4.3 4.1
New
4.5 3.8 3.6
Hampshire
New Jersey 5.9 4.8 4.4
New Mexico 5.9 5.7 5.3
New York 6.4 5.8 5.0
North Carolina 6.5 5.5 5.2
North Dakota 3.6% 3.4% 3.4%
Ohio 6.2 6.1 5.9
Oklahoma 5.6 4.8 4.4
Oregon 8.1 7.4 6.1
Pennsylvania 5.7 5.5 5.0
Puerto Rico 12.0 10.6 11.3
Rhode Island 5.4 5.2 5.0
South Carolina 6.7 6.8 6.8
South Dakota 3.5 3.5 3.9
Tennessee 5.5 5.4 5.6
Texas 6.7 6.1 5.3
Utah 5.7 5.2 4.3
Vermont 4.5 3.7 3.5
Virginia 4.1 3.7 3.5
Washington 7.4 6.2 5.5
West Virginia 6.0 5.3 5.0
CIA figures for world unemployment rates, 2006
 The natural rate of unemployment is the rate of unemployment
where the labour market is in a position of equilibrium. This means
that the labour supply = labour demand at a given real wage rate. All
those people willing and able to take paid employment at the going
wage rate do so.
The diagram below shows the labour supply (those willing and
able to take work at a going wage rate) and the labour force - the
number of active participants in the labour market. The labour force
expands as the real wage rises because there is a greater incentive to
search for paid work and sacrifice leisure.
Employment on the x-axis measures the total labour hours
supplied by workers in the economy in a given time period. As the
real wage increases, the total number of hours supplied by the labour
force will expand.
 The natural rate of unemployment is not zero - at the
equilibrium wage W1 in the diagram above, there is unemployment
measured by AB. This is made up of frictional plus structural
unemployment. At a wage rate W2 (above the equilibrium "market-
clearing wage") employment contracts along the labour demand
curve and total unemployment rises (see the diagram below)
 Dis-equilibrium unemployment rises to the level shown by the
distance CD. This is because labour demand has fallen and the
labour force has expanded. There is an excess supply of labour -
some people who are willing and able to find employment cannot get
paid work
 The Non Accelerating Inflation Rate of Unemployment is the
level of unemployment at which inflationary pressures in the
economy are stable. According to supply-side economists,
unemployment cannot be held permanently below its natural level.
Some argue if actual unemployment falls below the natural rate (i.e.
equilibrium unemployment) - there is upward pressure on wage
inflation that then feeds into general price inflation.
Clearly changes in unemployment do have an effect on the risk of
inflation. Consider this comment from the Bank of England.
"Developments in the labour market are a key determinant of
domestically generated inflation." (UK Monetary Policy Committee
minutes). As unemployment falls towards the NAIRU, skill shortages
exert upward pressure on wages and producer prices, until any
further falls in unemployment lead to future higher inflation.
Reducing unemployment is a key target for all Governments. High
unemployment has enormous costs for individuals, businesses, the
Government and the economy.
The way of solving unemployment will depend upon its cause
METHODS:-

 Government support to struggling industries in order to try to save

jobs e.g. airline industry

Provide more training and education to the unemployed. This

could help improve computer skills and communication. These
people will become more confident and employable.

Make more information available in job centres.

Reduce unemployment benefits or cut benefits all together

Try to bring the country out of a recession. The Government needs

to try to create demand in the economy. It could;

• Give grants to businesses to produce goods

• Have projects such as road building
• Cut interest rates to encourage spending
• Cut income tax to encourage spending

NEW DEAL:-
Labour’s New Deal programme for young unemployed people was
introduced across the UK in April 1998. In June 1998 the
Government launched a separate New Deal for Long-Term
Unemployed People aged over 25+.
The main options are:

•A subsidised job with an employer

•Remaining in full-time education and training
•Work within the accredited voluntary sector and
•Work experience with an environmental task force.

The programme is designed to provide pathways back into work for

the long term unemployed – many of whom have become outsiders in
the labour market despite the continuing strength of the British
economy. Higher levels of employment and economic activity add to
total national output and should help to improve the overall
performance of the labour market in sustaining long run economic
growth.