The unemployment rate in the US is currently under 4%, which is close to histori
ID: 1135603 • Letter: T
Question
The unemployment rate in the US is currently under 4%, which is close to historically low for the US economy. What does this suggest about cyclical unemployment in the US currently? Using the reasoning described in "The 'Natural Rate' of Unemployment," (RWM 4.2) explain why might it be unwise for the US government to try to push the unemployment rate lower than 4%? Why might businesses not want the government to try to further decrease the unemployment rate? Use the term "reserve army of unemployed" in your answer.Explanation / Answer
Cyclical unemployment -
Cyclical unemployment is the result of business cycle .if worker are loosing their jobs because of the downturnes of the business that is called Cyclical un employment.So that means cyclical unemployment is one of the overall factors of unemployment that relates to regular ups and down , orwe can say this is the cyclical trend of growth and production that occur within the business cycle .
Businesses in US Don't want the government to lower the rate of unemployment because they tthink that workers will be in control ,and will not go on strike ,or quit the job to get new one and will be unable to demand high wages if there is high rate of unemployment .
US faced Cyclical unemployment between 2007-2009 when there was subprime mortgage crisis .which significantly increased the rate of unempolyment to 10% in 2009.After that unemployment rate started falling down and it comes down to 5% in 2015 and improved after that .
Reserve army was the concept of karl marx a critique of political economy.it is similar with indusrial reserve army or relative surpluse population .karl marx said that the workers must be in weak position to bargain with the employer.the workers 's source of bargaining power is his abiliti to leave the job and get the new one .So if there will be large supply of unemployment then the worker will be in weak bargaining position . And will obey the orders of its employer because they would know that if they would leave the job they will not get the new because of the high rate of unemployment .So this supply of unemplyed worker is called " reserve army of unemployed ".
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