how is unemployment an obstacle to economic growth
Answers
Answer:
Explanation:
Due to the unemployment, government suffers the borrowing effect that means lower consumption rate and productivity.
Answer:
Unemployment hinders the economic growth of a country through many means, such as lower consumption rates, poverty, lower productivity, etc.
Explanation:
Unemployment always has a negative impact on the economy and economic growth of a country. These include:
Lower productivity
Increased unemployment would create a lower GDP (Gross Domestic Product). A negative multiplier effect would be felt in the economy.
Lower consumption
Unemployment curbs the spending capacity of an individual. This lowers the demand for products.
Deflation
Unemployment creates lower consumption, thus creating a steep decrease in product prices and leading to deflation.
Further Unemployment
Deflation can lead to lower production and thus layoffs, creating more unemployment.
Budget Deficit
Government would be compelled to provide unemployment benefits and this increased expenditure along with lower tax payment may lead to a budget Deficit.
Borrowing Effect
A natural response to a decrease in spending capacity would be to borrow. Unemployment can cause a steep increase in private debt.
Poverty
A basic effect of unemployment. Unemployment and poverty have a direct proportional relationship. Increased poverty can also lead to an increased crime rate.
Decreased Savings
Studies show that unemployment creates a savings rate of zero. This decline in savings adversely affects the capital in the economy.
Work for a lower income
Labourers would be compelled to work for a lower income than the market value.
Increased migration
Increased unemployment creates a flow of human capital to other countries.
To know more about deflation:
https://brainly.in/question/41393078
To know more about GDP:
https://brainly.in/question/920918
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