TUTOR-MARKED ASSIGNMENT

1. Give a critical assessment of any theory of inflation and give reason for selecting this particular theory.

2. Distinguish between GDP deflator as a measure of inflation and consumer price index as a measure of same. What are the merits and demerits of each as a measure of inflation?

3. What strategies would you recommend in the fight against inflation in Nigeria? 4. Distinguish between demand pull and cost push inflation how has these two views

on inflation been reconciled?

7.0 REFERENCES/FURTHER READINGS

Anyanwu, J.C. & Oaikhenan, H.E. (1995). Modern macroeconomics: Theory and

Applications in Nigeria. Joanee Educational Publishers Limited, Onitsha- Nigeria.

Dutton, D. (1971). A Model of Self Generating Inflation: The Argentine Case: IIn Journal of Money, Credit and Banking. Vol.3, No.2.

Ghatak, S. (1983). Monetary Economics In Developing Countries. The English language Book society And Macmillan London.

Jhinghan, M.L. (2003). Macro-Economic Theory, Eleventh Revised and Enlarged Edition. VRINDA Publications (P) Limited.

Ochejele, J.J. (2007). Economic Analysis. Ichejum Publishers, Jos, Nigeria

Shapiro, E. (1974). Macroeconomic Analysis, Third Edition. Harcourt Brace Jovanovich, Inc. New York.

144 UNIT 2: UNEMPLOYMENT 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 Meaning of Unemployment 3.2 Types of Unemployment 3.3 Measurement of Unemployment 3.4 Causes of Unemployment 3.5 Effects of Unemployment

3.6 Measures to fight Unemployment 4.0 Conclusion

5.0 Summary

6.0 Tutor Marked Assignment 7.0 References/Further Readings 1.0 Introduction

Towards the end of the nineteenth century and the beginning of the twentieth century, one of the most troubling questions was the reason for unemployment. Unemployment has been one of the most persistent and imaginable problems facing all industrial countries of the world. Unemployment has been defined as “involuntary idleness of a person’s willing and able to work at a prevailing rate of pay but they do not find work. This definition implies that unemployment must be involuntary. Voluntary unemployed persons who do not want to work like the idle rich are not considered unemployed. Excluded also are those incapable of work due to mental or physical disability. This unit introduces us into another macroeconomic theory that has a lot of policy implications in an economy. Hence, your attention is needed.

2.0 OBJECTIVES

At the end of this unit, you should be able to  Explain the meaning of unemployment

 Enumerate and analyze the different types of unemployment

 Analyze the measurements as well as the causes of unemployment with reference to Nigerian economy

 suggest policy measures to fight unemployment

3.0 MAIN CONTENT

3.1 Meaning of Unemployment

It is generally agreed that unemployment like inflation is a symptom of basic economic illness or macroeconomic disequilibrium. What is however controversial is the “appropriate” conceptualization of the subject. During the early days of the development

145 of unemployment theory, much controversy over the definition and origins of unemployment revolved around the distinction between “voluntary” and “involuntary” unemployment. Despite the difficulties of measurement and norm-setting of the above classification, the taxonomy of unemployment include a condition (being out of work), an activity (searching for work), an attitude (desiring a job under certain conditions), and a need (needing a Job (Levine, 1957).

The eight international conference of Labour Statistics held in 1954 gave rise to an International Labour Organization (ILO) definition concerning statistics of the labour force, employment and unemployment. It sees the unemployment problem as having three dimensions. The first dimension is determined by insufficient employment possibilities involving disguised or open unemployment. The second dimension is marked by an insufficient income structure. Unemployment and poverty therefore constitute two different viewpoints of one and the same problem. The third dimension is marked by unproductive employment (underutilization) of a considerable part of the working population.

However in October, 1982, the 13th International Conference of Labour Statisticians adopted a new resolution concerning statistics of the economically active population, employment, unemployment and underemployment.

The resolution defined the unemployed as persons above a specific age who, during the reference period, were without work, and were seeking work. This 1982 ILO definition, though similar to the 1954 definition, includes certain amplifications and modification for a more accurate measurement of unemployment.

SELF ASSESSMENT EXERCISE 1

Give a working definition of unemployment from your own words.

3.2 Types of Unemployment

Basically, unemployment may be classified into two categories: unemployment that results from deficient aggregate demand and all other unemployment due to frictions and labor market (mal) adjustments. The latter in turn is often divided into frictional, structural, seasonal, real wage, technological cyclical unemployment.

a. Deficient demand unemployment occurs when there is not enough aggregate demand to produce work for the whole labour force, no matter how it is trained or deployed.

b. Frictional unemployment arises because it takes time and resources for workers to change jobs, either voluntarily or involuntarily, even though suitable job vacancies

146 exist and can be found without the worker having to adjust his broad occupational status or his reservation wage.

c. Structural unemployment on the other hand, exists when there is a mismatching between the unemployed and the available jobs in terms of geographical location, required skills or any other relevant dimension

d. Seasonal unemployment is seen as unemployment due to the existing too high level of real wage. It normally results from seasonal fluctuations in demand for example; agricultural workers are employed during the peak of periods of sowing and harvesting but remain idle for some periods of the year.

e. Technological unemployment arises when machines replace men in the production process. This is a regular feature of technological advanced nations of Europe and America.

f. Cyclical unemployment however, is traditionally associated with the trade cycle, especially recession and depression. This explains why some experts classify it as a variant of deficient demand unemployment (Anyanwu, 1995).

SELF ASSESSMENT EXERCISE 2

Compare and contrast between deficient demand and cyclical unemployment