In order to participate in a nationr’s economy, money is required for consumers to purchase goods and services offered. Most consumers earn money through employment, and the number of individuals in a nation that are employed has been an important measure of economic stability (Boone, Berston, & Kurtz, 2016). The gross domestic product (GDP) is the measure of goods and services produced in a country during a year (Boone, Berston, & Kurtz, 2016).
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When GDP is increasing, the economy is in expansion mode. When GDP is decreasing, the economy is in a recession. Economic growth occurs when the GDP increases over time. When economists use the term economic growth, they are normally referring to sustained increases that occur over a substantial time period, rather than the quarterly changes sometimes discussed in the newspapers or on television (Boone, Berston, & Kurtz, 2016).
The unemployment rate is a measurement of the percentage of the workforce who are seeking work, but are not currently employed (Boone, Berston, & Kurtz, 2016). Unemployment has a variety of causes, and unemployment numbers are watched very closely. The U.S. Bureau of Labor Statistics issues a monthly employment report that describes the state of the U.S. economy based on employment statistics. The unemployment rate is calculated by dividing the number of unemployed workers by the total number of workers in the current labor force. An individual is considered unemployed if they do not have a job and have been actively seeking employment. When determining the unemployment rate, the statistic used is for workers who have looked for a job within the past four weeks (Khan, 2018).
When examining unemployment rates, there are three main reasons for unemployment that need to be considered. Frictional unemployment is short-term unemployment that applies to individuals who are members of the workforce, who are looking for new jobs. Recent college graduates who have not yet found jobs are frictionally unemployed (Boone, Berston, & Kurtz, 2016). Frictional unemployment is considered positive for the economy, as it creates a labor pool for expanding businesses. Structural unemployment is caused by a mismatching of work skills that employers are seeking with skills held by available members of the labor force. It can also be caused by location mismatches. For instance, there may not be any workers with the necessary education and skills available in the nearby area. Structural unemployment is not considered to be positive, however, it is acknowledged that it is a necessary part of a growing economy (Boone, Berston, & Kurtz, 2016). Changes in the business cycle can cause cyclical unemployment. Cyclical unemployment causes workers to be out of work for long periods of time because of a cyclical contraction in the economy, such as a recession or corporate downsizing (Boone, Berston, & Kurtz, 2016). When unemployment rates get too high,
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