The unemployment rate is at a plateau; the rate is staying constant only decreasing by 0.1% increments very slowly. A high unemployment rate can discourage households to spend less and save more. This can affect the GDP; if the rate is at a high, people are not going to spend money which affects consumer spending. GDP is the amount of goods and services produced in a year within a country. When people are unemployed, it means they dont have any income so they cant purchase any good and services. Since income reduces, the demand curve shifts to the left and producers react to this reduction of demand by decreasing production (how many goods and services they are producing), therefore unemployment has a negative effect on GDP and reduces it. The producer price index (PPI) is part of the GDP. The PPI measures price changes in the production and wholesale sectors of the economy, reflecting the cost environment for many businesses. When unemployment falls towards the 7% mark and GDP growth has been sustained for an extended period, economists will likely track the CPI and the PPI more closely.
Posted on: Mon, 02 Dec 2013 02:06:32 +0000
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