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In April 2019, the U.S. unemployment rate fell to 3.6 percent, its lowest level in almost...

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Economics

In April 2019, the U.S. unemployment rate fell to 3.6 percent,its lowest level in almost 50 years. In Texas, the unemploymentrate was 3.4 percent in June 2019, its lowest level sinceindividual state data began being kept in 1976. Unemployment ratesthis low are often viewed as being very good for the economy, soexplain how low unemployment rates benefit the economy in terms ofthe following:

  • productivity and GDP growth
  • wages and wage growth
  • consumer confidence
  • labor supply & demand
  • entitlement spending (make sure you understand the term“entitlement spending”)

Unemployment rates this low can also be viewed as beingdetrimental to the economy, so explain how low unemployment ratesmay also damage the economy in terms of the following:

  • productivity and GDP growth
  • employee loyalty
  • potential inflation
  • labor supply & demand

Answer & Explanation Solved by verified expert
4.3 Ratings (645 Votes)
Productivity and GDP growth productivity is output per unit of labour Ceteris paribus increase in labour factor input will lead to increase in output or GDP Productivity doesnt directly depend on employment level so generally lower unemployment boosts economic activities and promote GDP growth Low unemployment increases income and discretionary expenditure which increases consumption Consumption is a major component of GDP so rise in consumption leads to higher GDP Wages and wage growth Generally during low unemployment demand for labour by employers exceeds supply of labour which    See Answer
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