Macroeconomic Analysis: Unemployment and Inflation

Overview

A high unemployment rate in any economy is a symptom of dysfunctionality in the economy. People need income to be able to consume, and consumption leads to production and production leads to a higher demand for labor (employment), so unemployment is a crucial macroeconomic issue that confronts all modern economies. A lower unemployment rate, however, is not the end of the problem. The type of employment and the price of labor (wages) must be sufficient in order for consumption (which is the major component of GDP) in the economy to be healthy. If wages are low or if the prices in the economy are high, consumption would be low and thus, production and demand for labor would be low, too. High unemployment rate, high part-time employment rate for economic reasons, low wages, and high inflation could have negative effects on economic growth.

Assignment Description

In this assignment, you need to identify only two specific issues related to unemployment. You will study their past trends, provide an overview of their current status, and provide solutions to overcome them. You will use data, articles, experts' opinions, and government reports to draw a clear picture of the current unemployment issues.

Some areas you might consider are the following (based on gender, education, race, age):

• Unemployment rates for women
• Unemployment rates for men

Your research needs to be structured with consistent and clear thoughts. It also needs to be supported by actual data. Your results need to be based on solid facts. Your conclusion and recommended solution need to be thorough and based on your findings and understanding of macroeconomic challenges and macroeconomic policies.

• Introduction

Your introduction needs to include the following.

• Include a clear definition of unemployment and inflation and how and why they occur and rise in the economy.
• Briefly provide your understanding of the relationship between GDP growth and/or decline, high/low unemployment, and high/low inflation rates.
• Include a brief description of the two unemployment-related issues that you are going to address in this paper and their importance. Basically, why do you think they are important to research and resolve?
• Data

Obtain data from at least 3 credible sources (not Wikipidia). Use tables, graphs, and figures to support your argument. You can find the latest unemployment and inflation data at www.bls.gov (Bureau of Labor Statistics).

It is important to obtain your unemployment data from the Bureau of Labor Statistics (BLS) website. Follow the "Week 6 Guide to Obtaining Graphs for Data section" provided on this assignment page.

You need 5 data pieces in the data section (3 General data pieces: GDP Growth Rate, Unemployment Rate, Inflation Rate. Variable data pieces: 2 specific unemployment rates based on your variable (gender, race, education, etc.). All pieces of data need the same 10-year period you have chosen.

Data (graphs or tables) that have to be provided in this section:

• GDP: Graph that represents a ten (10) year period of GDP growth rate (percentage). This information is already available on the Bureau of Economic Analysis (BEA) website. Review the Week 6 Guide to Obtaining Graphs for Data sectiondocument for instructions.
• Inflation: Graph that represents a ten (10) year period of inflation rate (percentage). This information is already available on the Macrotrends website. Review the Week 6 Guide to Obtaining Graphs for Data sectiondocument for instructions.
• Unemployment: Data that represents a ten (10) year period of unemployment rate (percentage), which could be obtained from the Bureau of Labor Statistics (BLS) website. Review the Week 6 Guide to Obtaining Graphs for Data sectiondocument for instructions.
• Two Issues: Data that represents a ten (10) year period about the two issues you are going to address. Provide one separate data set (graph or table) for each of the two issues, which could be obtained from the BLS website.

• Analysis
  • Unemployment and Inflation: Discuss the trends of unemployment and inflation rates over the past 10 years and provide your objective analysis of the changes in unemployment and inflation rates and the current rates. Place extra emphasis on the periods where unemployment or inflation was either too high or too low. Also state the effect of the high and low rates on GDP.

This section needs to contain the following discussions based on the data that was gathered and your understanding of unemployment, inflation, and GDP.

• Two Issues: Discuss the two unemployment-related issues you selected. Provide an overview of their trends and use facts to highlight the major changes in their trends and their current statuses. State the reason(s) why you believe these two issues represent a challenge for the economy.
• Reflection and Critical Thinking

Connect all the dots together by relating your above analysis to other areas in the macroeconomy. Basically, you will link changes in overall unemployment, the two unemployment related issues you selected, inflation, and GDP to one another and how they impacted each other during periods of economic decline (recessions) and periods of economic growth (expansion).

• Solution
  • State which macroeconomic policy (monetary policy or fiscal policy) might resolve the issues you highlighted above, and state how this policy could be implemented and why it would solve these problems.
• Finally, provide your own solution. Basically, answer the following question.

What would you do to solve the macroeconomic issues you addressed if you were in charge of the U.S. economy? State why.