Question

Is a decrease in the unemployment rate necessarily a good thing for a nation? Explain. HINT: You may use Gapminder tools to identify GDP and unemployment (work) to compare two countries. (Figure licensed public domain by the Bureau of Economic Analysis.) Figure 2. Contributions to percentage change in real GDP Percentage point change 2.8 2.2 1.1 0.1 0.1 - 07 -0.2 Personal consumption Imports Business investment Residential Change in investment private inventories Exports Government spending Q1 2014: -2.1% Q2 2014: 4.6% Q3 2014: 5.0% Q4 2014: 2.2% Source: US Bureau of Economic Analysis. bioloittel iti. DUIDO

Answer 1

A decrease in unemployment is not necessarily a good thing for a nation.

Like two sides of the same coin, there are two aspects of a fall in unemployment rate.

On one hand, a decrease in unemployment rate means more people are getting jobs and the economy is growing positively to higher levels of output production and GDP

On the other hand, a decrease in unemployment rate means more jobs are being created, people are making more money and thus have higher purchasing power, leading to increase demand for goods and services, leading to inflation, which is a poor indicator for an economy.

Thus, one can say, lower unemployment leads to high inflation, which can lead to lower standard of living or poor indicator of economic growth.