Every government struggles with unemployment, inflation, and recession/depression, and each government must enact policies to combat these problems. In the United States, both unemployment and inflation have been fairly low (5 percent or lower) for much of the past two decades. But even low unemployment and inflation affect and undermine economic growth. The following chart summarizes the economic problems faced by states.

 
STATES’ ECONOMIC PROBLEMS

Unemployment

Inflation

Recession/Depression

Not everyone who wants to work has a job.The price of goods increases.Economic failure or collapse occurs in many sectors of the economy.

Unemployment

Unemployment occurs when there simply are not enough jobs for everyone who wishes to have one. Every economy has some unemployment because people leave jobs (by choice or against their will) and are usually unemployed for a time before they find new employment. Others are unemployed for longer periods.

Example: Analysts measure unemployment as a percentage of the work force who cannot find jobs. What counts as high or low unemployment is, to some extent, relative. In the United States, analysts consider a rate of unemployment above 5–6 percent to be high, even though many western European countries frequently have unemployment rates above 10 percent.

Previous section Types of Economies Next page Economic Problems page 2

Popular pages: Political Economy

Take a Study Break