Economics Unemployment if You Loose Thesis

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d.).

In order to understand this idea about inventories, it is necessary to understand that if the prices were to change and not be rigid, then it would be the prices and not the inventories that would guide companies in their decisions about production. For example, if prices were increasing, a company would know that their product is popular and that they should increase the production of it. And if the prices were decreasing, the company would know that their product is not selling well and that they should probably reduce its production. In an economy though where the prices are fixed, companies need another way of deciding whether they should increase or decrease production. This is where Keynes came to the conclusion that the key is to observe the changes in the inventories in order to drive production (What Causes a Recession to be a Recession, n.d.).

Over the years the change in the unemployment rate has been a good indicator of every economic downturn since 1929. When the change in unemployment has gone up more than 1%, we have always had a recession. Typically the change in the unemployment rate continues to go up for only a couple of months once a recession ends. The unemployment rate itself may continue to rise for several months, but the year-on-year change does not go up significantly. Looking at this is change in the unemployment rate will show how much better or worse the employment situation has gotten over the last year. This is not only a good measure for the job market, but it is also a very good measure for the state of the overall economy (Harrison, 2008).

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Although the unemployment rate in the country recently hit 8.5% we are a long way away from the all time high of 25% that was reached during the Great Depression. During that time 25% or one in every four people had lost their jobs due to the bad economy. Even though things are bad and 8.5% is seen a high rate for a recession, they are not expected to get anywhere near what they were like in the great depression. Economists are predicting that our economy will recover from its present state, but that it is going to take a little time, and possibly some more help from the government in the form of stimulus money (U.S. Unemployment Rates, 2009).

No jobs lead to no spending and no spending leads to even less jobs. It seems like a very vicious cycle that we find ourselves in, with no clear idea on how to break the cycle. But if you look at the recessions that have come before this one, we have always managed to recover from them and prosper once again. So with some time and patience this one, like all the others will also pass.

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