Macroeconomics: Money and Finance - Essay Example

Macroeconomics: Money and Finance Lecturer: Describe some of the structural reasons of European labour markets that keep European unemployment rates high. Please explain the possible reasons briefly. Structural unemployment involves an economic condition where people who are willing to work can not find a job due changes in economic demand (Tucker, 2011). Those changes may be attributed to technological, demographic and industrialization changes respectively (Tucker, 2011). This may further force on organisation to incur huge capital expenditure as it tries to retrain its employees (Tucker, 2011).

In above connection, structural unemployment is long rather than short term economic condition. Therefore, necessary measures need to be established in order to remedy the situation (Tucker, 2011).Empirical research indicates that European labour markets have been experiencing higher rates of unemployment as compared to Japan and the United States since the end of Second World War (Werding, 2006). Since 1993 the rate of unemployment in Europe had been increasing at a rate of 10 percent annually (Werding, 2006).

This may be attributed to poor European economic policies that had been established to address the issue of structural unemployment (Werding, 2006). Research further indicates that, the central reason where the rate of unemployment in Europe has been increasing may be due to institutional adjustments that have been taking place for the past twenty five years (Werding, 2006). For instance, European economy has been focusing on none monetary theory of structural demand rather than making necessary effective adjustment on labour demand (Werding, 2006).

Connectively, structural unemployment in Europe could be attributed to industrialization changes whereby, most organizations laid down workers who could not cope with new technological advancement (Werding, 2006). This further escalated unemployment cases as most people were unable to secure a job after losing the fast one (Werding, 2006). Additionally, many firms in Europe found it quite expensive to retrain their workers as most of those firms did not want to incur additional expenditure (Werding, 2006).

In above connection structural unemployment increased due to frictional factors such as most young people who had completed their college education could not are secure a fast job due to lack of experience and necessary expertise(Werding, 2006). This further led to an increase in number of both young people unemployed people across Europe (Werding, 2006). On the contrary, Japan and the United states established housing facilities that enabled workers to move into different parts of the states to look for a job that could suit their skills and experience.

This strategy helped to reduce the rate of unemployment in the U.S unlike Europe which did not embrace this strategy (Werding, 2006). 2(a) The Australian Reserve Bank measurement of GDP GDP: the Expenditure Approach in financial year Sep qtr 2011/ Jun qtr 2012 Items Symbols Billion of Dollars Percentage of GDP Consumption Expenditure C 194863 77.9 Investment I 24330 9.7 Government Expenditure G 7334 2.7 Net Exports NX(X-M) (81207-7535)= 23672 9.5 GDP Y 250199 100 GDP= C+I+G+NX Source: b) Find the most recent quarter CPI data available (for “all groups” and the Sub-group of “food and non-alcoholic beverages”) and calculate the annual Inflation rate for “all groups” from 2010 to 2011 and from 2011 to 2012 (using March quarter data for each year)?

Which period did experience higher Inflation? To compute inflation rate, percentage change of price index should taken into consideration. The following formula may be used to compute inflation rate Inflation Rate=percentage of price index Inflation rate= CPI current Year – CPI previous year×100 CPI previous year Whereby, Consumer price Index (CPI) is computed as CPI= Cost of base year basket of goods and services in the current year Cost of current year basket of goods and services in the base year Source: lecture note Therefore based on data from Reserve bank of Australia the following the CPI data for 2010 to 2011 and from 2011 to 2012 was retrieved.

Inflation rate for all groups as at March 2010 to march 2011 CPI Data for March 2010=95.2 CPI Data for March 2011=98.3 Inflation rate= CPI current Year – CPI previous year×100=98.3-95.2×100=3.26% CPI previous year 95.2 Inflation rate =3.26% Inflation rate for all groups as at March 2011 to march 2012 CPI Data for March 2011=98.3 CPI Data for March 2012=99.9 Inflation rate= CPI current Year – CPI previous year×100=99.9-98.3×100=1.63% CPI previous year 98.

3 Inflation rate =1.63% Based on the above computations it can be scrutinized that between March 2010 and a March 2011inflation rate for all groups was significantly higher than in March 2011 and 2012. Inflation rate for food and non-alcoholic beverages as at March 2010 to march 2011 CPI Data for March 2010=96.7 CPI Data for March 2011=100.9 Inflation rate= CPI current Year – CPI previous year×100=100.9-96.7×100=4.34% CPI previous year 96.

7 Inflation rate =4.34% Inflation rate for food and non-alcoholic beverages as at March 2011 to march 2012 CPI Data for March 2011=100.9 CPI Data for March 2012=98.4 Inflation rate= CPI current Year – CPI previous year×100=98.4-100.9×100= -2.48% CPI previous year 100.9 Inflation rate = -2.48% It can be scrutinized that between March 2010 and March 2011inflation rates for food and non-alcoholic beverages was higher than in March 2011 and 2012.

Aditionally, the inflation rates was generally high for all the commodities between March 2010 and March 2011. Reference List Reserve Bank of Australia. (2013). “Statistics Tables”. Retrieved :< http://www.rba.gov.au/ statistics/index.html> on 20th March 2013. Tucker, I. B. (2011). Macroeconomics for today. Mason, OH: South-Western Cengage Learning. Werding, M. (2006). Structural unemployment in Western Europe: reasons and remedies. Cambridge, MIT Press.