Dr. Mohamed RiyazhKhan – DoMS
SNSCE
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Unemployment occurs when a person who is actively
searching for employment is unable to find work.
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Unemployment is often used as a measure of the health
of the economy.
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The most frequently cited measure of unemployment
is the unemployment rate. This is the number of
unemployed persons divided by the number of people in
the labor force.
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According to Pigou, “A man is unemployed only when he is
both without a job or not employed and also desires to be
employed”.
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Unemployment is a major problem of a developing country
like India.
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1. Population Explosion
2. Inefficient Agriculture and industrial sectors
3. In appropriate Education system
4. Technology Advancement (Modernization)
5. Weakness in Five- year Planning
6. Less Saving and Investment
7. Inadequate irrigation facilities
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Frictional: Frictional unemployment is a temporary
condition. This unemployment occurs when an individual
is out of his current job and looking for another job.
Structural: This type of unemployment occurs when there
is a mismatch of skilled workers in the labour market.
Cyclical: Cyclic unemployment when there is a recession.
 Seasonal:
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occupations such as agriculture, the catering trade in holiday
resorts, some agro-based industrial activities, like sugar mills
and rice mills, etc.
 Disguised:
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The term “disguised unemployment” commonly refers to a
situation of employment with surplus manpower, in which
some workers have zero marginal productivity so that their
removal will not affect the volume of total output.
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1. Prime Minister’s Rozgar Yojana
2. Rural Landless Employment Guarantee Programme
(RLEGP)
3. Integrated Rural Development Programme (IRDP)
4. Jawahar Rogar Yojana
5. Employment Assurance Scheme (EAS)
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6. MGNREGA ( Mahatma Gandhi National rural employment
guarantee act)
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Is designed to provide job guarantee for at least 100 days in
rural parts of the country.
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According to Crowther, “ Inflation is a state in which the value
of money is falling, i.e., prices are rising.
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According to COULBURN, defined inflation that “TOO MUCH
MONEY CHASING TOO FEW GOODS”
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In economics, inflation is a sustained increase in the general
price level of goods and services in an economy over a period of
time. When the price level rises, each unit of currency buys
fewer goods and services.
 Inflation
is commonly understood as a situation
of substantial and rapid general increase in the
level of prices and consequent deterioration in
the value of money over a period of time.
Inflation is statistically measured in terms of
percentage increase in the price index.
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1. Over expansion of Money Supply
2. Expansion of Bank Credit
3. Deficit Financing
4. High Non-Development Expenditure
5. Huge Plan Investment
6. Black Money
 1. Creeping
 2. Walking
 3. Running
 4. Hyper
(Keynes)
When the economy is operating at Full-employment level.
As the quantity of money increases, the rate of interest will
fall and consequently investment will increase.
Aggregate Consumption expenditure will increase leading to
an effective increase in the effective demand.
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1. Increase in Public Expenditure
2. Increase in Investment
3. Increase in MPC
4. Increasing Export and Surplus Balance of Payments
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Excess of general demand but by an increase in costs, as factor of
production try to increase their share of the total product by raising
their prices.
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Thus a rise in wages leads to a rise in the total cost of production
and a consequent rise in the price level because fundamentally,
prices are based on costs.
 Phillips
curve is a historical inverse relationship
between the rate of Unemployment and the rate
of inflation in an economy. Stated simply, lower
unemployment in an economy is correlated with a
higher rate of inflation.
 This
means that when unemployment rate is low, it
requires a higher push up of inflation rate to bring
down unemployment rate.
Inflation Rate (%)
Unemployment Rate (%)
10
5
9
6
8
8
7
11
6
15
5
20
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Inflation Rate
 It
is an empirically observed relationship
relating unemployment to losses in a country's
production.
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The "gap version" states that for every 1% increase in
the unemployment rate, a country's GDP will be
roughly an additional 2% lower than its Potential
GDP.
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Supply-side economics is a school of macro economics that argues
that economics growth can be most effectively created by lowering barriers for
people to produce (supply) goods and services as well as invest in capital.
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According to supply-side economics, consumers will then benefit from a
greater supply of goods and services at lower prices; furthermore, the
investment and expansion of businesses will increase the demand for
employees. Typical policy recommendations of supply-side economists are
lower marginal tax rates and less regulation.