Question

Define the concepts of inflation and unemployment and its implications in the company.

Answer 1

Soln.

Inflation - It is defined as the quantitative measure of the rate at which the average price level of a group of specific goods and services in an economy changes over a period of time.

Unemployment - Unemployment is defined as the ratio of workers who are not employed and the total number of workers eligible for work. It is the inability of the workers to obtain work and contribute in the production process.

Inflation leads to rise in the prices of the materials used in the production process, that impact inversely to the production quantity. It also impact the workers, as they have to spend more with same amount of wage, which further leads to wage hike request by the workers.

Unemployment arises when there are not enough work available by the company for their production process. Also, unemployed persons are economically not strong and hence are not able to spend more money for the purchase of goods and services, that further leads to decrease in the demand of goods & services, produced by the company.