Macro-Economics 2 Assignment 1 1. Describe three methods of measuring a country’s total output (25)Three methods of, measuring a country’s total output are the income approach, output approach and the expenditure approach. THE INCOME APPROACH It measures a country’s total output in terms of earning of factors of production during the course of producing goods and services.Rent from land and buildings as well as royalties from patents and copyrights, wages and salaries from employment and profit from business enterprise s and interest earned from the use of capital. These are summed up to give total output at factor cost.THE OUTPUT APPROACH It measures country’s total output in terms of the value added by each sector of the economy. Adding up the value of outputs present two conceptual problems which are the valuation of inventories of goods produced but unsold and the double counting or multiple-counting which occurs when we add up market values of output of all firms.
THE EXPENDITURE APPROACH It calculates the flows of expenditure needed to purchase the nation’s output .These expenditure components include consumption (C), gross investment (I), Government (G) and net exports.Net exports are the difference between total exports and total imports.
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Consumer expenditure is all expenditure by household non durable consumer goods and non-durable consumer goods. Consumption expenditure is the largest component of GDP.2. Discuss the major causes of unemployment in Zimbabwe today.Unemployment denotes a situation where capable bodied and employable people that are aged between 18 and 65 are looking for jobs and cannot find them. It can also be described as the percentage of the economically active population that is not working but is how ever aggressively looking for employment.
(Dumbu and Karonga, 2013)Unemployment rate = (No of unemployed /Working population) x 100% The ever increasing rate of unemployment in Zimbabwe can be traced back to the 1990s, when Zimbabwe embraced the Economic Structural Adjustment Programme (ESAP). This was also worsened by the drought that struck the country in 1991-1992 which forced the greater part of the rural population who were previously not on the job market to migrate to urban areas in search of employment. The bedevilling economic environment since the start of the new millennium coupled with retrenchments and company closures have also worsened the unemployment rate in Zimbabwe.
Unemployment is Zimbabwe has been caused by quite a number of factors. Some of these seem to be of a political nature. Some of these causes are discussed below. SEASONAL UNEMPLOYMENT Stanlarke, 2000 defines seasonal unemployment as a type of unemployment caused by the fact that people are unemployed at certain periods of the time or year, as they work in trades where they are not required all year round such farming and construction.
The employment pattern thus move hand in hand with changes in seasons.In Zimbabwe Seasonal unemployment is a result of disparities or variations in seasons. In regions like Chiredzi where sugarcane is grown, more people are employed between planting and harvesting and then laid off thereafter and only to be recalled when the planting season starts. This is also evidenced at the Boka Tobacco auction floors which employs a big number of contract workers during the tobacco selling season and lays them of when the season ends.Technological Unemployment Technological unemployment takes place when better methods of production in the form of mechanization replaces the human asset. Such machines are bound to do the work that was supposed to be done by many workers in a labour intensive industry (Dumbu and Karonga, 2013). An example is when a farmer who used to rely on labour intensive harvesting acquires a combine harvester.
The machine will require only the operator and one or two assistants to do the work that was initially being done by hundreds of workers. This shows that automation and advancement in technology though being a positive move, it also brings in costs of unemployment. Cyclical unemployment This refers to unemployment that emanates from the business cycle that is the systematic ups and downs, or cyclical trends in an economy. When business cycles are at their peak, cyclical unemployment will tend to be low because total economic output is being maximized and thus more labour will be demanded to meet the high production output levels. Cyclical unemployment is also called demand deficiency unemployment.
It rides on the fact that the demand for labour is a derived demand meaning labour is not demanded for its own sake but it is demanded to produce goods and services. When the demand for these goods decreases the demand for labour also decreases as it will not be profitable continue operating. Cyclical unemployment is caused by a slump or recession in the economy such as was the case in Zimbabwe from 2002 to 2008.
Sales fell and some workers lost their jobs because there was inadequate demand for the goods and services they produced.Structural UnemploymentThis is unemployment consequential to business restructuring, usually owing to technological change, rather than rapid changes in supply or demand. It emanates from rigidities in the structure of the economy. These include structural changes triggered by shutting down of an industry for example as a result of depletion of critical raw materials such as minerals. This was evidenced in Zimbabwe where the Marange Diamond mines retrenched workers citing depletion of the Diamond ore deposits. Structural unemployment can also be triggered by hostile climatic disorders, such as drought and floods which affect agricultural production.
Also the imposition of economic sanctions as was done by western allies on Zimbabwe, lead to reduced demand for products and thus sometimes cause closure of some companies leading to structural unemployment.Also lack of innovation, there is no development in Zimbabwe’s industrialization and business, no new ideas, no new creations .Also the imposition of economic sanctions which would cause closure of some companies leads to structural unemployment.Poor industrialization also contribute on unemployment .
People are migrating from rural to urban areas seeking for jobs whereas the industries are closing down due to economic factors so firms are now operating below full capacity.Sluggish investment and growthThe bedevilling economic environment on its own has seen a number of companies closing due to prohibitive operational conditions which manifested through high input costs, hard currency shortages, parallel market pressures and high levels of interest rates. Return on investment has been dwindling thus forcing down the level of investments. This has consequently resulted in substantial unemployment.Poor macroeconomic policy environmentMonetary policy effects interest rates and exchange rate and thus impacts on investment, economic growth and employment as well as price stability.
This brings about investor confidence in turn. The absence of a sound monetary policy in Zimbabwe has affected many sectors of the economy thus leading to job cuts and unemployment.The investment/business climate is unfriendlyInvestors are attracted by a friendly and favourable business environment with favourable laws and regulations.
The investment climate in Zimbabwe however is not satisfactorily positive to attract foreign investors. There are some unfavourable laws governing capital repatriation and ownership structure such as the indigenization policy. This pushes away investors and thus increases unemployment.
Population growth rate and age structureAn increase in population without a complementary increase in job opportunities leads to an increase in unemployment. This is the case in Zimbabwe where investment is very low, companies are closing and the remaining ones can’t cope up with the demand for jobs.Tertiary EducationThe number of universities and other tertiary colleges have increased rapidly producing thousands of graduates per year. The industry on the other hand is closing down thus failing to absorb these graduates.
Job seekers thus increase whenever a graduation ceremony takes place thus increasing the unemployment rate.