Higher Level Of Prices Of Goods And Services Rises

Decent Essays

Q.1 When the average level of prices of goods and services rises, the inflation rate rises. I somehow disagree with this statement as it might be the secondary reason or not the only reason for the rise. But the factors that cause the inflation rate to rise are as follows:
a) An icrease in demand for goods relative to supply:
When there are many potential buyers of certain goods but the supply can not match the increased demand hence, results in Demand-pull inflation. Demand-pull inflation doesn’t result in inrease in rate of Inflation every time.
b) A decrease in the value of existing money or devaluation of currency:
If Government is printing more currency it simply means that depriciation of money will occur. When the money is devalued, several dollars will obtain smaller amount of commodities because the dollars are not in short supply.

Q.2 Unemployment Rate:
It could be defined as the proportion of work force that is presently jobless, are over 16, are available for work but one way or another have vanished their jobs and are keenly building efforts to locate employment. (Bureau of Labor Statistics. BLS)
This could be calculated bu using the following formula:
Unemployment Rate = Unemployed/Employed + Unemployed
For Example :
In December 2011, 248,976 thousand of Australian residents were employed and 64,283 thousand were unemployed.
To find the unemployment rate for December 2011.
Uemployment rate =64,283 ÷ (248,976 +64,283) = 20.52%
Inflation Rate:

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