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Abhishek Phadnis                           Essay on Inflation and  Unemployment Unemployment vs. Inflation Unemployment Unemployment is the phenomenon that is observed when those desirous of (and capable of) offering their services on the labour market fail to find gainful employment. Its antonym is full employment, which is the quantity of the labour force employed when the labour market is in equilibrium – in which case Aggregate Supply for Labour equals the Aggregate Demand for the same. Note that the Aggregate Supply of Labour is upward sloping, thanks to workers’ added incentive to work in the event of rising real wages, and that falling real wages would encourage companies to hire and approach full employment. It may be important to remember that the scenarios given below address the labour market as a whole, and not just the fluctuations of an individual market, which is why the full picture often appears only when all individual markets are viewed collectively (as there would be constant minor fluctuations in the individual markets). The Rate of Unemployment The rate of unemployment is thus defined as the number of unemployed as a percentage of the total labour force (which itself is defined as those over 16 who are either employed or desirous of gainful employment, a definition that notably excludes vast swathes of the population such as students, military personnel and the elderly. Several minor problems may arise when generating unemployment statistics, such as the definitional problems with defining certain unique sections of society like those approaching retirement age and the accounting problems arising from the discrepancies caused by the disparity between the real number of employed/unemployed and the official number. Eventually, those in training programmes and the informal economy may be ignored, but this is a considerable problem in generating all variety of economic statistics and ought not to be considered the preserve of unemployment statistics alone. Categories of Unemployment that Comprise the  NRU For definitional and comprehensibleness purposes, unemployment is divided into three major categories – structural unemployment (which is what arises from the disparity between the skills demanded by the economy and those supplied by the labour markets, 1
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Abhishek Phadnis                           Essay on Inflation and  Unemployment particularly in sunset industries such as the once-fabled car market of Detroit, USA, and redundancies caused by technological improvements), seasonal unemployment (the periodic loss unemployment in industries regularly accustomed to periods of market inertia, such as holiday/charter service workers and even professional cricketers on the English county circuit) and frictional unemployment (the interim period of transition from one job to another, depending on a host of other factors, largely recognized because unemployment is a stock
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