Unemployment rates
Unemployment rates refer to the percentage of individuals in the labor force that are unemployed but are seeking for employment or are willing to work. The metric varies from one country to the other depending on their economic situation.
Inflation rate
Inflation rate, on the other hand, is termed to as the percentage change in the price levels from one year to the other. In most countries around the world, Central Banks are tasked with the role of implementing suitable monetary policies that keeps inflation at check. In the event of an increase in inflation rates, the cost of living in a country may also shoot up. The metric to be analyzed in this case is unemployment rates.
Determination of the growth rate for the metric
The unemployment rates in the U.S. reduced to 4.44% in the year ending 2017 (Statista). The reduction in the unemployment rates is an indication of the growth in the country's GDP. With the strengthening economy, more jobs were created around the U.S. Additionally, the number of civilians being laid off or retrenched reduced during the same period. Consequently, the unemployment rate also showed a downward projection. The U.S. has in the past decade maintained a budget deficit and this is an indication that its revenues are significantly higher compared to the expenditures. There are other factors that contributed to a reduction in the unemployment rates in 2017. Firstly, the Fed Reserves implemented suitable monetary policies in terms of interest rates and market regulations that had a positive impact on the job market. The growth in the global economy also boosted the U.S. economy, thus resulting in a decline in the unemployment rates. Finally, an increase in the Foreign Direct Investment in the U.S. also contributed to the reduction in the unemployment rates witnessed in 2017.
Impacts of fiscal and monetary policy on the metric
Both fiscal and monetary policies are used to influence unemployment rates. Fiscal policy is termed to as government's use of tax policies and spending to influence macroeconomic conditions in a given country. The decision by a government to cut down on taxation may have a positive impact on unemployment situation in the country. A reduction in taxes implies that costs incurred by companies will also be on the decline. Subsequently, the companies will not have to retrench some of its employees with the aim of improving financial performance (Gordon 56). An increase in government spending may, however, contribute to high debt exposure. Huge budget deficits put a country in a tricky situation that may contribute to increased unemployment rates.
Monetary policy entails the decisions that are made by the central bank of a given country with the aim of ensuring that the supply of money is consistent with the growth in the economy. In the event of high inflation rates, for instance, the Central Bank may decide to reduce the supply of money into the economy and focus on increasing interest rates. High-interest rates will discourage civilians from borrowing money from banks and an overall reduction in money supply to the economy and this may also contribute to an increase in unemployment rates (Gordon 80). A reduction in borrowings may have a negative impact on investments, and this may lead to stagnations in job creations, thus an increase in unemployment rates.
Work Cited
Gordon, Robert J. Macroeconomics. Harlow: Pearson, 2014. Print.
Statista. "United States - Unemployment Rate 2017 | Statistic." Statista. N.p., 2018. Web. 3 Dec. 2018.
