Unemployment can be defined as a condition economically manifested by the circumstance that a person seeks jobs aggressively, but they are incapable of being hired. Unemployment level inclines to vary with economic conditions among other circumstances. A reliable flow of constant income is the sustenance of any thriving economy. Unemployment and underemployment break this flow considering the fact that those not employed or underemployed have no outflow or cash flow. There is no doubt that whenever money does not move into the economy, then the economic development ceases or becomes sluggish. The unemployed individuals are a burden not only to the economy, but also to society as a whole.

The diverse economic costs of unemployment are more evident when analyzed via the national checkbook lens. Unemployment makes both the state and the local government cater for unemployment benefits, Medicaid, and, at the same time, offer food assistance. Apparently, the same government is unable to collect revenue from people who are not employed, thus limiting the collection of income. This certainly forces the government into borrowing money, which defers the impact and costs of unemployment to the future, or alternatively cutting other spending, which conceivably exacerbates the economic situation.

Unemployment is an extremely dangerous state, especially for the economy of the USA. More that 70 percent of whatever the economy of the US produces goes to unemployed workers and personal consumption. Even individuals getting the support of the government cannot spend this aid at erstwhile levels. These workers’ production leaves the economy, which reduces the Gross Domestic Product and tends to move the country away from the effective allocation of resources. It is equally worth to note that companies usually pay for high unemployment. The benefits of unemployment are largely financed by taxes that are paid by businesses. At the time when the rate of unemployment is high, countries will always seek to replenish their coffers through increment of taxation on businesses. As a result, this will discourage companies from employing any more workers. The companies will then face less demand for products they make, and hiring or keeping workers will be more expensive for them.


Largely, economics deals with individuals and reflects the manner in which people interact with one another as they make major decisions affecting their lives. Therefore, economics is studied through observing the principles of the decision-making power of individuals that constitute the economy. Further, the principles of economy’s operation and the interaction of individuals with one another are studied. In this observation, the theory that impinges on the above-mentioned economic problem is the one that states that society experiences a short-run tradeoff between unemployment and inflation. This tradeoff usually arises since prices tend to respond so slowly to the quantity of money changes in the short run. For instance, suppose the government reduces the quantity of money revolving around the economy.

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In light of this, the theory distressing the explicit economic problem is that one requiring that a society goes through a short-run exchange between unemployment and inflation. In most instances, this exchange comes about due to the trend at which prices are inclined to act in response on a steady base to alterations in the amount of money in a short-run. A fine instance is a time when the state of a nation opts to cut-off the quantity of money circulating in the economy. For that reason, not all the service or commodity prices will go down at once because of several aspects. It could take a little bit of time before every firm decides to issue a new catalogue. This means that prices are well thought-out to be sticky in the short-run.

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In the event that the government opts to reduce the amount of money moving around the economy, the amount of money spent by individuals around the economy also reduces significantly. Lower sticky prices together with lower spending reduce the quantity of services and goods sold by firms leading to lower sales. This will force firms to lay workers off. Thus, reducing the quantity of money causes unemployment until such a time when prices fully adjust to this change.

It is expected that from this class, I will be able to gain knowledge and understanding on how to link theory with a particular economic issue. I will also be able to understand various issues that affect the economy and analyze them in theoretical perspectives.

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The escalating rates of underemployment, unemployment, as well as the issue of retirees have in the same way led to aggravating problems. In addition to the social unrest and social displeasure that unemployment creates in society, underemployment as well as the high rate of unemployment has been established to contain self-perpetuating detrimental influence on the economic stability, including the businesses of a nation. More worse is the reality that such influences are more subtle and long-term.

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