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MACRO ECONOMICS
NAKAFEERO JOVIA 2017/BU/2668
ASABA REBECCA 2017/BU/2718
NAMBATYA JOAN 2017/BU/2730
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UNEMPLOYMENT

Unemployment refers to the situation of actively looking for a job or employment but not being currently
employed.

NATURE.

Involuntary unemployment. Is a situation where a member of labor force is willing and actively looking
for jobs but cannot find employment at the ruling(on going) wage rate.

Voluntary unemployment .Is a situation where jobs are available.

Types of Unemployment.

Cyclical unemployment.

This exists when individuals lose their jobs as a result of down turn in aggregate demand(AD) if the
decline in aggregate demand is persistent and the unemployment long term is called demand
deficient(Keynesian, Deficient) Aggregate demand is the total demand for goods and services within a
particular market.

Causes

Fundamental imbalance within the economy. A number of people looking for jobs in the economy is
greater that the number of jobs in the economy. Hence if all the jobs in the economy are filled
simultaneously, there will be someone who will be unemployed.

If the GDP (Gross domestic Product) of the economy reduces hence since less and less goods are being
consumed by consumers, fewer people are required to manufacture them. Since fewer people are required
to manufacture them, since fewer people are required, manufacturers begin to lay off excess employees.

Solutions.

By increasing the GDP of the country. This job is done by the government .They cannot single handedly
end the recession ,however the government can accumulate the money in the form of debt and end the
negative cycle by creating more jobs which can later be paid off by taxes received .

Massive programs have to be created to help economies cover from them. (Training programs.)

Structured Unemployment. Occurs when certain industries decline because of long term changes in
market conditions.

Causes:
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Globalization. Is the process between people, companies and governments worldwide so on knowledge
needed in the business is got outside world and ignore outline.

Changes in functions and tasks when tiled houses try to replace iron sheet houses.

Change in Technology

Wage related workers simply reject the offer for new jobs of less wage to be paid to him/her.

High population growth.

Solutions.

Breaking geographical barriers by improving infrastructure s and establishing good economy.

Flexibility in production.

Regional Unemployment.

This is when structural unemployment affects local areas of an economy.

Causes.

Decline of industry. Some areas relied on certain industries to provide a large number of jobs. If these
industries close down, then areas suffer from high rate of unemployment.

Negative multiplier effect. The related business suffer unemployment due to closer of these industries.

Labor immobility.

Lack of skills/qualifications.

Higher unemployment amongst ethnic minorities.

Classical Unemployment. Refers to when workers fail to accept low wages is so they become
unemployed.

Causes.

Powerful trade unions which bargain for higher wages.

Minimum wages.

Sticky wages. Like if the business makes losses and fails to pay workers’ wages which they have to
strictly get so they will become unemployed.
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Solution.

Setting up a minimum wage at equilibrium.

Seasonal Unemployment. This happens when certain industries only produce or distribute their products
at certain times of the year.

Causes.

 Reduction in demand of seasonal goods.

 Frictional unemployment. Refers to when workers lose their current jobs and in the process of
finding another one.

Causes.

 Information mismatch. Lack of information for available job opportunity on the side of workers.
 Lack of information on the side of employees of the existence of those unemployed whom they
can employ.
 Geographical immobility of labor that is where labor is not willing to move to other areas where
jobs can be found.
 Laying off of workers involuntarily and permanently due to government policies.

Solutions

 Placing of agencies and private job listing sites which keep a database of the jobs and job seekers.
 Providing advertisements of jobs in newspapers, radio and TVs on net.
 Improving infrastructures to reduce labor immobility.
 Reducing the unnecessary laying off of workers by the government.
Search (Graduate unemployment) this is where newly qualified individuals are not working but
looking for jobs.
Hidden Unemployment. This is where labor is employed in a low grade occupation as compared
to high skills and qualifications attained.
Casual unemployment. This is where a worker is employed when worker is available and
becomes unemployed when work is completed.
Open urban unemployment. This is where people are actively looking for jobs in urban areas
but cannot find them.
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UNEMPLOYMENT IN LDC.

Causes.

 Lack of capital. There is need for huge amount of capital when new projects, buildings and
factories are constructed, a large number of people engaged in these projects so lack of capital is a
major cause of unemployment.
 Over population. When the population growth is high and yet a natural resources are limited, so
they cannot meet the available resources demand.
 Seasonal variations. Some agriculture and industrial factories do produce their goods seasonally
and times new they are not operating they are unemployed.
 Lack of effective demand. When supply aggregate increases than an aggregate demand so
unemployment prevails.
 Lack of skills. Majority of the people are educated and they have no skill about any particular job.
So they cannot get the job.
 Poor performance of agricultural sector. The less developing countries depend on the agriculture
sector and production of agriculture depends on the nature.
 The land tenure system refers to the right of regarding ownership and use the land in the
economy. So people who have plenty of land .It is underutilized and others who don’t have land
and at all are unemployed.
 Trade cycles. Sometimes due to crisis unemployment prevails. Because in the period of
depression, prices, prices, profits, production and rate of unemployment falls.
 Poor Infrastructural facilities.
 Natural disasters.
 High levels of poverty.
 Rural Urban migration.
 Technology.
 Lack of serious man power planning.
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Solutions.

 Increase in capital formation. Government should establish the labor intensive industries to
increase the rate of employment.
 Establishment of small scale industries.
 Technical training centers. These centers should be established to provide training and skill to be
the public. It will be very useful in curtailing the unemployment.
 Control on population. Family planning program should be introduced and population should be
reduced according to the size of natural resources.
 Increase in effective demand. Government should increase the rate of investment by establishing
the various industries to increase the rate of employment.
 Employment exchange offices. The offices should be established to provide the proper
information’s about the employment to the public.
 Political stability.
 Promoting investment.
 Infrastructural development.
 Land reforms.

INTERNATIONAL TRADE

Is the exchange of goods, capital and services across international borders or territories?

Is the buying and selling of commodities between all among countries

Import trade is the buying of commodities from other countries

Export trade is the selling of commodities to other countries

Types of international trade.

 Bilateral trade. This is a trade agreement in which two countries exchange goods and services.
 Multi-lateral trade is a type of international trade among two or more counties.

Basis of international trade.

International trade is based on the principles of;

 Absolute advantage. A country would have absolute advantage over others is it could produce a
certain commodity at less input cost than others.
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 Comparative advantage. Exists when one nation has a lower opportunity cost than another in the
production cost than another in the production of a good and service

Benefits of international trade

 Allow countries to exchange good and services with the use money as a medium of exchange.
 Greater variety of goods available for consumption where it brings in different varieties of a
particular product from different destinations.
 Promotes efficiency in production as countries will try to adopt better methods of production to
keep cost down in order to remain competitive.
 More employment could be generated as the market for the countries goods widens through trade.
Through establishment of newer industries to cater for the demands of various countries.
 Enables a country to consume things which either cannot be produced within its borders or
production may cost very high. Therefore it becomes cost cheaper to import from other countries
through foreign trade.
 Utilization of surplus produces. It enables different countries to sell their surplus products to their
countries and earn foreign exchange.
 Provide UN open wide market countries can benefit from this by selling their products.
 Increase government revenues through taxes imposed on imports and exports and this enables the
gov’t to meet its obligations.
 Promotes technology transfers. This is due to involvement of trade with more developed
countries.
 Widens consumer’s choice as a result of variety of good imported which rises people welfare.

Disadvantages of international trade.

 Encourages dumping. More developed countries usually make developing countries their
dumping ground for surplus and useless commodities.
 Leads to imported inflation. This arises as a result of importation from a country already suffering
from inflation.
 Increases to completion. This leads to shutdown of some local domestic industries which cannot
compete favorably with imported commodities.

REASONS WHY INTERNATIONAL TRADE TAKES PLACE.

 Uneven distribution of resources. Different countries are not equally endowed with various
natural resources like minerals climate conditions, soil differences therefore they would benefit
from international trade.
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 To dispose of surplus. The country might produce much output than what is demand so
international trade is favorable.
 Lack of enough cooperate factors. A country might be having natural resources but unable to
exploit them due to certain factors like inadequate skilled labor.
 To provide the country citizen with variety of goods due to shortages at home.
 To strengthen political ties between countries.
 To access large markets. So international trade expands market for commodities

References

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