﷽

Presentation By:
Syed Tahseen Raza
Roll No 01
M.com 1 st
Subject:
Principles of Economics
Presentation Topic:
Unemployment and Inflation
 e n t
oy m
p l
n e m
U
 Outlines
o Definition of Unemployment
o Three Important Categories
o Types of Unemployment
o Natural Rate of Unemployment
o Reasons of Unemployment
o Consequences of Unemployment
o Solution for Unemployment
o Calculation of Unemployment
 Definition of
Unemployment

 Unemployment Refers to the situation where the

people of country do not find work to earn their
livelihood.

 The situation in which people do not find the work

despite of their willingness to do work.
 Three Important
Categories

 Measuring unemployment is the job of BLS(Bureau of

Labor Statistics) which is part of Department of Labor.
 BLS(Bureau of Labor Statistics) places each adult (age
16 and older) into one of three categories.
1) Employed Labor Force
2) Unemployed
3) Not in Labor Force
 In Pakistan there is Pakistan bureau of statistics.
 Types Of Unemployment

1. Structural Unemployment
2. Seasonal Unemployment
3. Frictional Unemployment
4. Cyclical Unemployment
5. Technological Unemployment
 Natural Rate of
Unemployment

 In Every Economy the 100% employment is impossible

so according to the economist some people will be
unemployed in each and every economy and that is
called as natural rate of unemployment .

 Natural rate of unemployment is between 4-6% (in

some books 2.5-6%).

 It is also called as Full Employment.

Unemployment Rate In
Pakistan
Pakistan Data
 Cause of
Unemployment
1. Increase In Population.
2. Rural-urban Migration.
3. Downsizing.
4. Lack Of Capital.
5. Lack Of Credit Facility.
6. Seasonal Variation.
7. Technology Advancement.
8. Lack Of Skills Work Experience.
9. Lack Of Education.
Consequences of
Unemployment

1. Rise In Criminal Activity.

2. Violence.
3. Drug Addiction.
4. Terrorism.
5. Social And Moral Evils.
 Solution for
unemployment

1. Establishment Of Small And Medium Scale Industries.

2. Vocational And Technical Training Centers.
3. Encouragement Of Construction Industry.
4. Internship Programs.
5. Provision Of Easy Credit.
 Calculation of Unemployment
Rate
 Unemployment rate is the ratio of the number of
people unemployed to the to the total number in the
labor force .

 Unemployment Rate= Unemployed

X 100
Labor Force

 Example: If labor force is 15 million and 3 million are

unemployed then unemployment rate is
 3 million/15 million x 100 = 20%
 Labor Force Participation
Rate
 The labor force participation rate is the ratio of labor
force to the population (age of 16 or above).

 This Basically shows the portion of population that is

contributing to labor force.

Labor force Participation= Labor force

X 100
Total Population above 16 age
 i o n
a t
Inf
 Outlines
o Definition Of Inflation
o Types Of Inflation
o Inflation Types On Basis Of Speed
o Cause If Inflation
o Calculation Of Inflation
o Monetary Measures To Control Inflation
o Fiscal Measure To Control Inflation
 Definition of Inflation
The Persistent increase in the general price
level of goods and services in a economy of an
country is known as inflation.

When too much money chases too few goods is

called inflation.
oGeneral Price= We Take Average of Basket of goods(300-500 Items).
oPersistent= ‫اااااا اتار‬
‫کیاا دو دن ک‬
‫ااہ اااہکاا ایااا‬
‫ ن‬، ‫اااااا اااابڑااھنا‬
‫دھیرے دھیرے اااپراااائزز ک‬
‫چڑھاؤ۔‬
Pakistan Inflation rate
Kinds of Inflation

1. Demand Pull Inflation

(Related With Demand Side)

2. Cost Push Inflation

(Related With Supply Side)
Cause of Demand Pull
inflation

1. Population Growth
2. Deficit Financing
3. Increase In Wages
4. Foreign Remittance
 Cause of Cost Push
Inflation

1.Increase In Cost Of Raw Material.

2.Increase In Wages Rate. 3.Decrease In
Production. 4.Imported Inflation.
5.Indirect Taxes.
 Inflation on the basis of
speed
1.Creeping or Mild infation
(between ,less than 3% to 3.00% a year)
2.Walking infation
(Between 3.01% to 10.00% a year )
3.Galloping
(10.00% or more a year)
4.Hyper infation
(50% a month)
 Calculation of Inflation
 There are various formulae for calculating inflation rate.
1. WPI (Whole sale price index)
2. SPI (Sensitive Price Index)
3. CPI (Consumer Price Index)

 Most Common formula is CPI ( Consumer Price Index)

CPI = Current Price level – Previous Price Level

Previous Price Level X 100
 Measure To Control Inflation

1.Monetary Policy
a) Made and adopted by Central Bank
b) To manage the money supply in country

2.Fiscal Policy
a) Made by Government
b) To manage the public Revenue and Public Expenditure
 How Monetary Policy is
used

1.Central bank reduces the money

supply by selling bonds etc.

2.The central bank raises its interest

rate for the commercial banks.
 How Fiscal Policy is used

1.Govt. can Reduce public expenditure

2.Govt. raises the direct tax to discourage

the consumption thus aggregate demand for
goods falls.
 r ve
Cu
i ps
i ll
Ph
 objective
To discuss the relationship
between unemployment and
inflation according to Phillips
curve, whether application or not,
in Pakistan.
 Analysis
 There is tradeoff between inflation and unemployment
in the short run.

 When unemployment decrease, inflation increases and

vice versa.

 In the long run there is no tradeoff between

unemployment and inflation rate.
Diagram(short run)
Diagram (Long Run)
 Stagflation
This is the combination of two words.
1. Stagnation
2. Inflation
The condition of the economy where the
price increase in economy with high
unemployment.
Reason: Decrease in Aggregate Supply.
Thank You
You can get notes from me.