Anti-unemployment and anti-inflation polices în România

Abstract

We’ve chosen this theme because we believe there is a strong relationship between inflation and unemployment and we wanted to discover more information about the ways to diminish them using policies of anti-inflation and anti-unemployment. Depending on the country, there are only some policies that can be applied in order to have a positive impact on the economy of that particular state.

Another important reason of choosing this topic is the use of inflation and unemployment rate in governmental decision making for a stable economy. For example, the government has the power to increase the number of jobs to reduce unemployment or decrease the price of imports for reducing inflation.

In this project, there can be found significant information about the classification of inflation and unemployment, how these indicators can be measured, what causes them to rise or fall and the analysis of Romanian inflation and unemployment during some important periods of time.

Introduction

To attain sustainable economic growth coupled with price stability continues to be the central objective of macroeconomic policies for most countries in the world today. Among others the emphasis given to price stability in conduct of monetary policy is with a view to promoting sustainable economic growth as well as strengthening the purchasing power of the domestic currency. The question on whether or not inflation is harmful to economic growth has recently been a subject of intense debate to policy makers and macro economists.

Anti-inflation policies refer to measures which can counteract inflation. The need for counteracting inflation arises because its effects exercise great detrimental influences on the economy of a country. It is for this reason that inflation has come to be considered an acutely disagreeable phenomenon. It may be mentioned that inflation may not be necessarily injurious under all circumstances but may be capable of mobilizing the industry of an economy especially when inactivity has become its cardinal characteristic. This does not extenuate the evils of inflation which, in view of their diverse character, have hardly retained any justification for its existence. The disasters of inflation have been so great that economists in the present century have made notable efforts in finding out measures for controlling it. The nature of anti-inflationary policies cannot be readily appreciated unless the effect of inflation and the term is precisely comprehended.

The national unemployment rate is defined as the percentage of unemployed workers in the total labor force. It is widely recognized as a key indicator of labor market performance. A closely watched economic indicator, the unemployment rate attracts a great deal of media attention, especially during recessions and tough economic times.

As the U.S. Bureau of Labor Statistics (BLS) notes, when workers are unemployed, their families lose wages, and the nation as a whole loses their contribution to the economy in terms of the goods or services that could have been produced. Unemployed workers also lose their purchasing power, which can lead to unemployment for other workers, creating a cascading effect that ripples through the economy.

Unemployment even affects those who are still employed. When workers are let go, it increases the amount of work those who are still employed have to cover. And because unemployment usually increases when companies are trying to cut costs, those expected to pick up the slack are not receiving any additional compensation for extra hours worked. Unemployment can also have a negative mental effect on those who are still working. They may become more concerned about losing their own jobs or be hesitant to look for something better because they "are lucky" to be employed at all. They may even feel guilty about having a job when their co-workers are out of work.

To better understand the nature of unemployment, policymakers need information on many aspects of it, including the number of unemployed people, the period of time for which they have been unemployed, their skill levels, the trend in unemployment, regional disparities in unemployment and so on. Once these statistics have been obtained and interpreted, policymakers can use them to make better-informed decisions about steering the economy and countering unemployment.

Chapter 1. Inflation

1.1. Definition of inflation

Inflation is the process of making addition to currencies not based on a commensurate increase in the production of goods. —Federal Reserve Bulletin (1919)

Most prominent among these inflationary forces were a drop in the exchange rate of the dollar, a considerable increase in labor costs, and severe weather. —Federal Reserve Bulletin (1978)

The term inflation was initially used to describe a change in the proportion of currency in circulation relative to the amount of precious metal that constituted a nation’s money. By the late nineteenth century, however, the distinction between “currency” and “money” was becoming blurred. Today, inflation is synonymous with a rise in the general price level and therefore a fall in the value of money. Inflation occurs when the amount of buying power is higher than the output of goods and services. Inflation also occurs when the amount of money exceeds the amount of goods and services available. As to whether the fall in the value of money will affect the functions of money depends on the degree of the fall. Basically, refers to an increase in the supply of currency or credit relative to the availability of goods and services, resulting in higher prices. Therefore, inflation can be measured in terms of percentages. The percentage increase in the price index, as a rate per cent per unit of time, which is usually in years. The two basic price indexes are used when measuring inflation, the producer price index (PPI) and the consumer price index (CPI) which is also known as the cost of living index number.

Inflation exists in a country whenever the supply of money and of [circulating] bank deposits increases, relatively to the demand for media of exchange, in such a way as to bring about a rise in the general price level. (Emphasis added.) —Edwin Walter Kemmerer (1934)