Is zero unemployment with price stability sound economic policy?

Question

I think the use of fiscal and monetary policy to achieve "zero unemployment with price stability" detriments American free markets, Federalism, and Independence

Answer 1

In theory it sounds good but unfortunately it is not.

The economic theory has proved that there can be no zero unemployment. Even if there were jobs for everyone there would be a small percentage of unemployment. This unemployment is called friction unemployment. Is caused by people that they do not like their jobs and decide to quit. These people need time to get informed of new jobs and for small period are unemployed.

The economic theory also suggests that really low unemployment will actually bring inflation. All the people will have money to buy goods so the demand will be high. The producers will increase the prices to slow down demand (since they can not produce unlimited), hence you will have inflation.

The economic theory also continues and suggests that you can not reduce unemployment unless you have a certain level of inflation. The inflation is increasing the prices and according to the law of demand and supply an increase in price will make the suppliers to produce more so they will need more workers.

Of course this theory has some faults and that is the reason why many countries have to face high inflation and high unemployment (stag-inflation).

To sum up. It sounds really good but there are no evidence that this can happen and even if it happens the results will not be that good or have a duration.

Answer 2

Yes. I think that zero unemployment would be a fine policy. I also think that you have a good point with the free market view. I think that if business what to fire or lay off employees, then they need to have that right. But those employees could get "holding jobs" until they find another good one - such as performing government grunt labor or working in fast food restaurants - stuff that anyone could do. At least working for minimum wage is better than not working for any wage,. It would eliminate the need for unemployment benefits, and people would be more motivated to find work elsewhere instead of relying on an unemployment check.

Answer 3

It is not possible to achieve- ever. Someone will always be between jobs and someone will always pay more for something than you just did. That is why you can make a lot of money trading stocks. I hope we never even get close to price stability, for then, I would be out of business!
Not only that but very low unemployment pushes the envelope of wages, which would rise dramatically, thus killing the idea of price stability in the general marketplace. Employers would have to pay more for the best employees but they would have to raise prices to pay for it. 4.5% unemployment (as measured by the US Government...) and 2.1% inflation seems to be a very nice and stable formula so far.

Answer 4

Let's call zero unemployment ZU, price stability is PS. ZU is a statistical goal. As we approach ZU, we assure the maximum possible production. (If no one is unemployed, then everyone is producing). Large production leads to PS. The two go hand in hand. People work, they produce, the products are bought by a ready market because people are working. Perfection?
In New Orleans, there is actually a severe labor shortage. They have negative unemployment. Economist should monitor what happens when a destroyed American City, rebuilds itself.

Answer 5

Just an advance note i am a conservative. Its not all Obama's fault, sure he could be doing a lot more to fix it, but only half of the blame can be laid on him the other half falls on Congress. Plus there is no definitive answer to solve unemployment, but here's what i would like to see: how about the President, Congress and anyone who wants to be an informed citizen brush up on Econ 101?

Answer 6

Zero unemployment would lead to inflation in the labor markets. Not good, erosion of purchasing power of your $.

Answer 7

Not to mention the whole capitalistic system. People with good products, and good connections deserve to be rewarded with super wealth. Like all the fine folks at Halliburton, Enron, Tyco, Wal*Mart.

Answer 8

yea just try to achive 0% unemployment around New Orleans.

Answer 9

we have never had zero unemployment

Answer 10

It sounds nice but isn't possible.