-
8/8/2019 7. Economic Flactuations and Unemployment (2)
1/16
ECONOMIC FLUCTUATIONS&
UNEMPLOYMENT
M. PRASHANTHI
MANNA
MAJUMDER
NITIN KR. GUPTA
MANISH MITTAL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
2/16
EFFICIENT OPERATION
OF
AN ECONOMY
REAL OUTPUT FULL EMPLOYMENT PRICE STABILITY
ECONOMY
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
3/16
Fluctuations in the Economic
Growth
Growth Rate Of NNPfc
-8
-6
-4
-2
0
2
4
6
8
1951
-52
1961
-62
1971
-72
1981
-82
1991
-92
Year
GrowthRate
eries1
Year Growth Rate
1951-52 2.8
1956-57 -2
1961-62 6.4
1966-67 -5
1971-72 0
1976-77 2
1981-82 -6
1986-87 2.2
1991-92 -1
1996-97 5
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
4/16
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
5/16
Major Variables Recovery Boom Recession Depression
Industrial production Gradual increase Rapid increase Decline Rapid decline
Commodity prices -do- -do- -do- -do-
Cost of production -do- Increase rapidly, but
slower than rise in prices
of goods & services
Gradual decline Rapid decline but slower
than commodity prices
Profits Satisfactory level High Gradual decline Negligible profit or losses
Investment Replacement of existing
capital equipment
High Fall slowly Falls rapidly
Employment Gradual increase Rapid increase Starts falling Falls rapidly
Wage rate Improvement Rapid increase but less
than rise in prices of
goods & services
Starts falling Falls rapidly than the
commodity prices but
less
BUSINESS CYCLES & CHANGES IN ECONOMIC STRUCTURE
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
6/16
Major Variable Recovery Boom Recession Depression
Bank credit Liberal loans and
satisfactory
demand for
advances
Liberal loans and high
demand for
advances
Starts falling Falls rapidly
Bank reserves Improvement Rapid increase Suffer a setback Falls rapidly
Discount rates A little improvement -do- Gradual decline -do-
Speculation activity Gradual increase At high level Minimum possible Hardly any
Inventory stocks Gradual decline Very little Gradual increase High level
Business failure Smaller in number Hardly any Smaller in number Large in number
Business expectation Optimism coupled with
cautious decision
making
Highly optimistic Pessimistic with cautious
decision making
Highly pessimistic
BUSINESS CYCLES & CHANGES IN ECONOMIC STRUCTURE
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
7/16
Theories to Explain Cyclical Behavior of Economy
Multiplier Theory
Accelerator Theory
Behavior of inventories
Cycles in public expenditure
Behavior of money supply
Fluctuations in India are due to
Performance in agricultural sector
Behavior of public investmentAd hoc or unpredictable changes
THEORIES OF BUSINESS CYCLE
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
8/16
Leading IndicatorsTheir turning point occurs before those of total economic activity.
Gives advance warning about the turning point in the economic activity
Lagging IndicatorsThey follow the business cycle
BUSINESS CYCLE INDICATORS
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
9/16
Rate of unemployment key indicator of economy Unemployment arises out of the deficiency of the
effective demand.
It is percentage of persons in the existing workforce who
are not employed.
Number of persons unemployed
Number in civilian labor force
EMPLOYMENT FLUCTUATIONS
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
10/16
UNEMPLOYMENT
FRICTIONAL STRUCTURAL CYCLICAL
TYPES OF UNEMPLOYMENT
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
11/16
Defined as the level of employment that results when therate of unemployment is normal.
Does not mean zero unemployment
Rate of unemployment measurement problemsOver looks two problems
People being excluded even though they would preferto be working
People being included who are not seriously seekingemployment
People who are actively seeking employment are notcounted as unemployed
Method of classifying part time workers.
Classified as unemployed who are not seriously seekingmarket employment
FULL EMPLOYMENT
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
12/16
Nature and TrendMostly structured and disguised
Experienced the cyclical unemployment in last twodecades
ClassificationUrban unemployment
Industrial unemployment
Educated unemployment
Rural unemployment
Open unemployment
Disguised unemployment
UNEMPLOYMENT IN INDIA
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
13/16
Estimation
By planning commission
By National Sample Survey Organization (NSSO)
Usual status unemployment
Weekly status unemployment
Daily status unemployment
UNEMPLOYMENT IN INDIA
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
14/16
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
15/16
Unemployment in urban areasOpen and undisguised
Employee guarantee programDrought Prove Area Program
National rural employment program
Jawahar Rozghar Yojana
Implementation problemsLack of resource to finance these programs
Choice of appropriate works to be doneLack of charity regarding the organization of these programs
UNEMPLOYMENT IN INDIA
MACROECONOMICSICFAI BUSINESS SCHOOL
-
8/8/2019 7. Economic Flactuations and Unemployment (2)
16/16
MACROECONOMICS
THANK YOU
ICFAI BUSINESS SCHOOL