Business Economics the Limitations of the National

¶ … Business Economics

The Limitations of the National Income Accounts in How They Represent Our Standard of Living

The national income accounts have been the center piece in all matters concerning economics across the globe. These rules are a primary source of reference in determining the economic status of a given nation. It is the most preferred indicator of the rate of improvement and making comparison across nations. However, it is not the perfect indicator for the economic state due to its limitations that give a false image of the highlighted economy (McEachern, 448).

To start with, the national income accounts do not include other financial details such as the non-market productions in a given country. These include activities such as preparations in various productions. For instance, in preparing food in a restaurant, one does not include the energy used by the person preparing the food before taking it for sale. When such details are included then it becomes evident that some financial details are over stated. This is as a result of the exclusion of the non-market productions (McEachern, 449).

The nation has both legal and illegal activities that bring in revenue. Often, the national Income accounts consider the legal business deals leaving out the illegal trends. There other illegal income generating activities that take place in the market today. Despite being illegal, these activities are gaining popularity. Such include the buying and selling illegal drugs e.g. marijuana and cocaine. Nonetheless, they fetch in a significant amount of revenue.

The comparisons done across nations may portray a negative image of one of the countries being compared with another. For instance, there are countries that are lagging behind in economic affairs, other are struggling with internal weaknesses, yet other are flourishing.

The National Income Accounts can be particularly misleading because they do not portray the actual image of the resident s welfare. This is because the incomes of the people vary significantly, and in order to obtain an equal income distribution, it would require intense research surveys as opposed to assumptions and estimations.

Chapter 16, Question 5

Importance of frictional unemployment in any economy

Frictional unemployment contributes remarkably in reducing the economic level of a nation. It refers to a time when the jobs in a given nation do not match with the man power available in the market. Such a situation is a cause of an economic slow down. In this context, the economy suffers because there is no much revenue coming through. Hence, it is crucial that the government works out frictional unemployment for the development of the economy (Gwartney, Stroup, Sobel & Macpherson 160).

It is a clear sign of the economic well-being and reflects the future of the economy of a country. This refers to a time when people seek for employment that best agrees with their ambitions. On the other hand, such unemployment is a grand opportunity to maximize in productions by picking the best employees. In this regard, the absence of such employment becomes a stumbling block for any progress to take place. On the other hand it is a means of stagnating and reducing economic growth.

It is beneficial to note that frictional unemployment contributes to meeting the demand and supply in the market. This meeting and maintaining of the equilibrium is advantageous to young job seekers and entrepreneurs in the market. As a result, there are high chances of upgrading productions and increasing revenue especially in enhancing innovations. For instance, frictional unemployment can lead to people changing profession to engage in businesses that suite a person's interest. This is clearly a way of improving performance in the business and employment industry. In addition, it is important t note that by working passionately one can produce more than one who is working under pressure. Similarly is the importance of frictional unemployment in a nation.

Once the government and leadership of a nation have realized this aspects and it implications then the government can come up with additional job opportunities, business forums, and entrepreneur programs that will lead to economic recovery. However, it is crucial to note that it is an individual effort that can easily eliminate such a situation. Therefore, it calls for team work to reduce frictional unemployment.

Chapter 16, Question 11

Types of Unemployment

The three types of unemployment are

i) Frictional unemployment: this refers to the category of people with capabilities of performing well in their areas of work. They are people who may have drooped out of their employment, school leaver etc. They are people that are temporarily waiting and looking forward for better opportunities to earn a living. On the other hand, it refers to the state of seeking for preferred employees in a given company. This is likely to a short-term circumstance (Tucker 170).

Frictional unemployment can be worked out by government temporary jobs. For instance, summer job programs that serve for a short while can provide temporary employment for school leavers.

ii) Structural unemployment: it is a long-term situation that arises from the mismatch of employment. Often it comes up when people with less skill are fired from their employment due to under performance. Therefore, in this category there are vacancies but the people may be under qualified. This calls for extra effort for one to improve in skills and knowledge to get employed (Tucker 171).