Frictional Unemployment

Frictional unemployment is accredited to the required time in order to match the activities of production with resources that are experienced. This type of unemployment occurs since resources, in most cases, labor, are in the course of migrating from one activity of production to another. In this situation, workers are in quest of employers, and employers are in search of workers, thus the two sides have not come to a match. The witnessed mismatch occurred because of information that is limited, usually due to the geographical separation that exists between resources and producers. It usually arises from people who are just leaving from colleges, as well as the unemployed and in the process of seeking for new jobs.

This kind of unemployment is extremely crucial to any economy since it signifies economy’s  well being. Frictional unemployment is usually related to fast growing economies that are characterized by an expanding mobile, adaptable, as well as flexible labor force. Frictional unemployment is of extreme benefit to workers since it gives them a chance to look for jobs that suit them. This promotes quality in production of goods and services, resulting in a steady economy, as there is always a motivation to work harder in the new job leading to increased production. It is also beneficial to companies, as well as corporate since it gives them an opportunity to select from among the best talents. In the event that an economy does not have frictional employment, it would mean that workers remain at the same jobs forever, thus creating a system that is stagnant, and that hinders innovation, in addition to rusticating skills. It is crucial to an economy since it matches the supply and demand for workers, thus bringing a state of equilibrium in the market (Kim, 2010).

 Hyperinflation can be defined as extremely high inflation, usually above 100% for over 3 consecutive years, or 50% in a month. This condition in the economy is extremely devastating as it reduces the value of the country’s currency to the floor. This means that goods, along with services, become extremely expensive since it snatches the purchasing power from buyers. It terminates the middle class by destroying the value of savings, cash, bonds, as well as other paper instruments.

Hyperinflation also has negative influence to a country’s wealth allocation, as it leads to a wealth shift from the people, who hold money, to the state, which is the issuer of the same. It also leads to more gains to borrowers, than to lenders, when loan agreements are carried out just before the hyperinflation. Hyperinflation also leads to wastage of time and resources. For instance, inflation of 600% suggests that prices have to be altered repeatedly in a single year, thus leading to a waste of time, along with resources. Such disruption leads to firms shying away from investing. This is not suitable for the growth of any economy (Thomas, 2010).

To manage hyperinflation, the government may be required to do budgetary process under control. It can also stabilize the inflation expectations and restore confidence. This can be achieved through the implementation of an exchange rate that is fixed, and that is pegged to a currency that is stable, say the U.S dollar. This will ensure that the Central Bank has the obligations of exchanging the local currency, for the one that is reserve, at a fixed rate. Thus, people will be less willing to spend the domestic currency so fast since they are assured that the domestic currency is convertible to the foreign one.

Unemployment exists in three forms, which are exhibited in a range of ways. Firstly, there is frictional unemployment, which is characterized by the migration of persons from one job to another. This is unemployment over a very short time, and exists in the form of a worker who has quit one job for another; it takes a day or so before reporting to his or her new place of work. It is usually caused by inadequate information between the worker and the employee. In solving frictional unemployment, the government can use a device system of providing information to workers about the existing job opportunities. This will reduce frictional unemployment. Before the arrival of the internet, conveying of information about the existing job opportunities was scarce, but with the existence of the internet, such information can easily be found. Thus, this can be solved by posting the necessary information through the internet.

There is also structural unemployment that is caused by changes in the structure of consumer demand or technology. This mode of unemployment occurs due to a mismatch of skills in the labor market, causing a long-term unemployment. In combating this form of unemployment, the government can reinvest in traditional training methods. In addition, government can support and introduce training incentives for disadvantaged; government can also expend federal efforts to upgrade educational investment in youth.

Finally, there is cyclical unemployment, which occurs because of changes in the business cycle, which is the negative correlation that exists with Gross Domestic Product. In this case, when the economy is in recession, the overall demand for goods and services is low, which reduces the consumer spending. This causes retrenchment of the organization work force and consequently leads to unemployment. The government can encourage consumer expenditure by lowering interest rates and taxes (Allan, 2003.)