Macroeconomics Essay Example | Topics and Well Written Essays - 2000 words - 1

Macroeconomics - Essay Example The paper concludes with the role of various entities in controlling voluntary unemployment. Classical economists viewed labour market similar to other markets based on supply and demand in that price would adjust to ensure that quantity demanded equaled quantity supplied. However, labour market differs in setting price and quantity of supply and demand. In case of labour market, effective supply of labour is a challenge as it depends on factors such as time, skills, wages and availability. A rise in overall wages may not result in more supply of labour; on the contrary, may lead to less supply of labour or no change in labour. Within the overall labour market, particular segments are assumed to be subject to more normal rules of supply and demand as workers are likely to change jobs due to various reasons, particularly in response to differing wage rates leading to unemployment for certain period of time. Unemployment is one of the serious problems that can affect people directly or indirectly, in any nation. Every country faces this problem; however, it widely varies in proportion. Labour economics is one of the important sections of market economics, besides financial market and product market, and is studied at micro and macro levels. While, microeconomics of labour market deal with role of individuals and individual firms in the labour market, macroeconomics looks at the interrelations of labour market, the goods market, the money market, and the foreign trade market. Understanding of labour market is the centre feature of any macroeconomic theory. In the classical view of the labor market, all unemployment is voluntary. When the economy goes into a recession and the demand for labor falls, the wage rate will decline and people will opt out of the labor force. However, the classical theory could not explain situations the 1930 recession thoroughly. Economics has various definitions of voluntary and involuntary