Frictional Unemployment and Hyperinflation

Introduction

There are numerous definitions of frictional unemployment. It is essential to note that many of those definitions describe frictional unemployment and its elements. Frictional unemployment is also known as voluntary unemployment. It occurs in instances whereby the employed individuals have a continued habit of changing their job, career and sometimes the location of the job (Sexton, 2013). The jobless in these cases have the required skills to get a job. Frictional unemployment does not include individuals employed but those who are looking for other jobs. Mismatch of supply and demand causes frictional unemployment. The above-mentioned mismatches include payment and location (Arnold, 2011).

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Frictional unemployment

It is imperative to point out that frictional unemployment cannot be eliminated from the economy. There are numerous essential economic benefits associated with it. It has been said to be a sign of a successful economy. Frictional unemployment is an indication that economy is fast developing whereby there is enough of flexible labor force in place. In instances where frictional employment does not exist, the same employees tend to occupy the same jobs for a long time (Sexton, 2013). The system becomes stagnant since innovation and utilization of better skills are not facilitated. There are numerous advantages attributed to frictional employment. The most notable advantage of frictional employment is that it strikes a balance in the labor market (Feldstein, 2003).

Hyperinflation

Hyperinflation has been said to have devastating consequences to the economy. It achieves this trait by wiping out the middle class through lowering the value of cash and other negotiable instruments. Hyperinflation affects the stock market, hence weakening the value of cash. In coming up with an explanation for its existence, it has been stated that it occurs when the government fails to balance its deficit, after reaching a maximum inflation rate.

The situation occurs in a way that it becomes impossible to turn it around. When inflation exceeds, its steady level hyperinflation occurs. It is only through wage and price control that hyperinflation can be contained (Stone, 2007).

Hyperinflation is said to take countries’ economies by surprise. Under hyperinflation, many countries fail in maintaining the fiscal policy. Hyperinflation is very common in dictatorial regimes whereby government expenditure is not controlled. The first step in preventing hyperinflation from getting spiral is lowering the government expenditure to a reasonable level. There are short run options of making sure that hyperinflation is contained.

They include working towards restoring the value of the currency by balancing the deficits. Slowing down the velocity of the currency is also a well-known method of reducing hyperinflation. The velocity of the currency is slowed by not placing a foreign exchange value to the currency in question (Ryan, 2012). Raised income should go hand in hand with an increase in raising funds. It may include improving on the tax collection or privatization of the state owned assets. The policy makers have a duty to change policies and formulate rules geared towards curbing hyperinflation (Taylor & Weerapana, 2010).

Conclusion

Frictional employment has several benefits to any economy. Without it, economic systems become stagnant and less productive. On the other hand, hyperinflation is devastating to the economy and ought to be dealt with once it occurs. There are many policies which can be formulated to minimize the rate of hyperinflation. Joint efforts of the policy makers and other key stakeholders can assist in alleviating the situation.

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References

Arnold, R. A. (2011). Macroeconomics. Mason, OH: South-Western/Cengage Learning.

Feldstein, M. S. (2003). Economic and financial crises in emerging market economies. Chicago: University of Chicago Press.

Ryan, J. S. (2012). Personal financial literacy. Mason, Ohio: South- Western/Cengage.

Sexton, R. L. (2013). Exploring economics. Australia: South-Western Cengage Learning.

Stone, G. W. (2007). Core Macroeconomics. New York, NY: Worth.

Taylor, J. B., & Weerapana, A. (2010). Principles of macroeconomics: Global financial crisis edition. Mason, OH: South-Western Cengage Learning.

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StudyCorgi. (2021, April 30). Frictional Unemployment and Hyperinflation. Retrieved from https://studycorgi.com/frictional-unemployment-and-hyperinflation/

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"Frictional Unemployment and Hyperinflation." StudyCorgi, 30 Apr. 2021, studycorgi.com/frictional-unemployment-and-hyperinflation/.

1. StudyCorgi. "Frictional Unemployment and Hyperinflation." April 30, 2021. https://studycorgi.com/frictional-unemployment-and-hyperinflation/.


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StudyCorgi. "Frictional Unemployment and Hyperinflation." April 30, 2021. https://studycorgi.com/frictional-unemployment-and-hyperinflation/.

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StudyCorgi. 2021. "Frictional Unemployment and Hyperinflation." April 30, 2021. https://studycorgi.com/frictional-unemployment-and-hyperinflation/.

References

StudyCorgi. (2021) 'Frictional Unemployment and Hyperinflation'. 30 April.

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