Inflation And Unemployment Rate In European Country
Introduction
In this report, we have discussed about how Employment rate and Inflation rate relate with other important variables and how they create a significant influence on the economy of European Union countries.
The European Union is a political and financial association of 28 part expresses that are found basically in Europe. It has an area of 4,475,757 km and it is an expected populace of around 513 million. Every part state is involved with the establishing arrangements of the association and subsequently subject to the benefits and commitments of participation. Australia, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherland, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden are the countries of European Union.
Employment and Inflation rate are significant variables which could hugely affect to the performance of a whole economy of a country and it was the main reason why we select these 2 variables as our key variables for our white paper. As mention before, due to inflation in European countries, other main fields are highly affected. The main factors that are affected due to inflation are government general final consumption expenditure, government expenditure on education, GDP per capita, employment rate. And when it comes to employment rate, it affects to government expenditure on education, GDP per capita and inflation significantly. Therefore, we have tried to discover what these factors are and how these factors cause a significant influence over economy of EU throughout this report. What is inflation?
Inflation is a continued increment in the general value level of goods and services in an economy over a time period. It may affect many aspects of the economy. When the general value level ascents, every unit of cash purchases fewer products and services. Thusly, inflation affected the purchasing power and real value of goods and services.
Main Measures of Inflation Rate
General Price index and consumer price index are the main dimensions that are widely used for exploring the inflation rate. The Consumer Price Index is a proposition that examines the weighted average of prices of a basket of consumer goods and services.
How inflation rate affects for economy?
Inflation impacts economies in a different way which can act positive and negative ways. The negative consequences of inflation an expansion in the opportunity cost of keeping cash and vulnerability over future inflation which may demoralize businessman as well as it may help to decrease investment. Costumers store goods up until the price of goods go up. Reducing the unemployment rate and the nominal wage rate are the positive effects of this inflation.
How to change inflation rate?
When we come to the figure there are so many different things to see. That figure shows inflation rate changes over time period and significant increases and decreases. Average line shows average inflation rate in European countries.
“Demand full inflation, cost full inflation and built in inflation are the types causes of inflation. Demand full inflation at the point when the general interest for commodities and activities in an economy expands more quickly than the economy's generation limit. As well as cost pull inflation occurs significant increments in the expense of significant products or services where no reasonable option is accessible. ”
The figure 2 shows average inflation for the appropriate country. Croatia has a maximum average inflation rate that is 1500. Compare with other countries that value is the highest value. That chart shows many countries' inflation rate changes. As well as 1900 have significant changes in the inflation rate among European countries and that 1965 and 2015 years have a slowly significant change. Actual and estimate forecast indicators are show that each chart. The line(which has Y=-mx+c type) that shows in each country describe the average inflation. R square value and p value also can get be for each year using this graph. When there has high inflation in the year the average inflation curve has big slope.
How Government consumption expenditure affects on inflation rate?
Government expenditure defines to buy products and services that incorporate open utilization and open speculation which means public consumption and public investment. Public investment is an investment way that invests by government. Public investment generally constitutes a relatively small percentage of overall public spending public investment will, in general, be estimated quantitatively, on a yearly premise, as a level of complete national pay in a given period. Tangible (transport, telecommunication) and intangible (education, skills, knowledge) investment are the main part of this. Welfare and pensions are the welfare expenditure from public investment ways.
“The increase in government spending causes an inflation rate decrease. The reason for that is when government increase government expenditure people will not have money on their hand. “
How Government education expenditure affects on inflation rate?
Public spending on education incorporates direct use on education organizations just as instructive related open sponsorships given to families and regulated by instructive establishments. Open elements incorporate services other than services of instruction, nearby and local governments, and another public office. Public spending incorporates consumption on schools, colleges, and other public and private organizations conveying or supporting instructive administrations. Among the EU Member States, the financing of instruction essentially originates from government, with a little job for private sources (counting families, undertakings, non-benefit associations and religious organizations), while a significantly littler job is commonly played by worldwide associations, (for example, the United Nations or the World Bank). It ought to be noticed that some administration consumption identifies with the exchange and installments for training to the non-instructive private division - this incorporates appropriations to family units and understudies just as installments to other non-instructive private substances. Thusly, this part is checked twice, once in government consumption, what's more, a second time in the consumption of family units and other non-instructive private elements.
“When government education expenditure increases it will cause increasing inflation rate. ”
Country name Government education expenditure Government consumption
Denmark 258 1352
Finland 243 1119
Netherland 235 1262
France 206 1223
Ireland 211 989
Poland 113 420
Portugal 165 889
Pressing on the bar on each country in Tableau graph in Figure 3, we can get the above pieces of information about countries' government education expenditure and government consumptions. Normally government expenditure and government consumption have a negative relationship because of the limited resources. When government consumption increases, government education expenditure will be decline. Ex (Denmark has the highest government education expenditure and consumptions).
“Finally, we can conclude that there is a negative relationship between government expenditure and the government education expenditure. As well as those factors are affecting for increasing or decreasing of inflation rate. ”
Relationship between Inflation types and Education Expenditure
Society is a dynamic organization that changes from some of the socio-cultural factor, educational standards and economic conditions as well as mainly the term of the science and the technology. But the due for an extraordinary and the growth of this extraordinary this factors can found as the crucial problems. So the thing is inflation in various dimensions of social factors. If we look at some economic conditions of the humans in our society, here we can easily classify the whole society into the 2 basic groups. A large part of our population belongs for a upper economic class and the large population falls below a poverty line. Economically wealthy people are trying to burn off excuses money in the anyway of the markets. This extraordinary use to creates the economic inflation that has the impact on a market economy as the whole.
Economic inflation affects the unity of the society. It wants to categories the society into the 2 complete isolated sections. As the result normal social development is several stages. How far his ideas are true and what are those impacts of economic inflation on our education systems essentially very important to make plans for the harmonious development of the society. Keeping this in view this study were conducted to estimate the different impacts of economical inflation on the education.
When we observe by a finding that the economic inflations of a familiar countries if the European nations countries and their expenditures on the education was very independent. The comparison of expenditures on education of a human belongs for the various economic inflation groups have been crates also. It has the found by a result that a rate of the expenditures in educations of a familiars belongs for very high economic inflations groups were scientifically higher than a familiars belongs for the average and the some low economic inflation groups. Results of this indicate that economic conditions of a familiar play vital roles in the education expenditure to their kids.
So here I create some calculations to create a relationship between them. First one is average inflation. Then I used the inflation type variable for this creation. It mainly identifies levels of inflation. I used 3 stages such as medium, high a low level. When the average inflation rate is below 3 it is a low-level inflation and between 3 -6 it is the medium level inflation country. Finally, when the inflation rate is higher than the 6 it is the high level inflation country.
“I mainly identify when the education expenditure is high in some country their inflation level also very high as well as if the government pay less education expenditure their inflation rate is low. Here I mainly identify when the education expenditure is high in some country their inflation level also very high as well as if the government pay less education expenditure their inflation rate is low. ”
How inflation affects to the GDP
In past few years people discuss about the relationship between the inflation and the Economic growth has a most widely researches topic in the macroeconomic. In economy inflation is suggest as the increasing the level of prices as well as not only economic growth but also the Gross Domestic Product (GDP). Gross Domestic Product can measures as the values of the country’s their final goods in the specified time.
Gross Domestic Product = Consumption + Government Expenditure + Investments + Net Exports. An increase in inflation means that prices have gone up very immediately. As inflation rises the purchasing power of money decreases which in turn reduces consumption and therefore decrease Gross Domestic Product. High inflation can make investments less attractive for people, which creates uncertainly for the future and it can affect the balance of payments as exports are more expensive. As a result Gross domestic Product is further reduces. Therefore, Gross Domestic Product seems to be negatively linked to inflation. However there are studies that show a positive correlation may also be present. For an example the Phillips curve shows that higher inflation is associated with lower unemployment rates, which implies that economic growth has the positive effect. In this worksheet I examined that relationship in European nation countries over the 1990 to 2017 years. Finally here I saw there is a negative relationship between the GDP and the inflation in the European nation’s countryseat least in the short run which consistent with the most of theories that have been developed last years with this relationship.
Effects of employment rate
Through this section we are going to analyze how employment rate has been affected by various factors over years.
Employment can be simply defined as state of having paid work. Employment rate measures the proportion of the working age population of a country that is employed. This ratio can be used to evaluate the ability of creating jobs of an economy and labor market stance. High employment rate creates positive effects on GDP per capita.
Here we discuss about factors that have effects on employment rate in European Union.
Employment rate over years
As shown as the above figure, the employment rate has grown continuously grown over the years in European Union. From 1960 to 1990 time period it shows a slow growth and after 1990, it shows a fast growth in employment rate. The highest employment rate has been recorded in 2008. In 2007, 2008 and 2009 years, EU countries also faced to global financial crisis and the employment growth was affected. However, they have managed to keep the employment rate within a certain level without a large fluctuation. They have created their own strategies to keep this growth up in future. They are aiming to increase the employment rate of the population of age 20 to 64 years to at least 75% by 2020. By 2018 the EU countries have recorded the highest employment rate since 2005. The employment rate for men is higher than for women in 2018 in EU countries. Currently Italy. Croatia and Greece show the lowest employment rate while Luxembourg shows highest employment rate of 71. 86% following Germany, Denmark, Austria and Estonia.
Relationship between Employment rate and Inflation?
Here in above figure, we have compared employment rate with inflation over the time period from 1960 to 2020 in European Union countries. The relationship between employment and the inflation is a positive relationship. Usually when the employment rate is high, it results in a high wage and it creates a high demand for goods and services which increase costs for businesses. When the cost is increased, companies increase price of their products and the inflation occurs. Basically, inflation result mainly from wage and price-setting behavior that is closely linked to the domestic business cycle in EU. Considering the above chart, the employment rate and the inflation rate in EU, inflation rate has increased faster than the employment rate changes. Inflation rate shows more fluctuations than the employment rate. Higher inflation rate is shown in 1989 but we cannot specifically identify an increase between the employment rate and inflation in that year.
Relationship between employment rate and government expenditure.
This map basically describes the relationship between employment rate and government expenditure on education in 28 countries which are belong to European Union over the period of 1960 to 2017.
When it comes to this map, there are five variations of blue color and light blue colors represent lower employment rates and higher employment rates represent from dark blue colors. According to our map Romania had the highest employment rate and Croatia had the lowest employment rate.
The government expenses on education represent from yellow color circles which have different sizes. According to our data, Denmark had the highest amount of government expenditure on education and Croatia had the lowest amount of government expenditure on education.
Generally, there should be a positive relationship between employment rate and government expenditure on education. But when it comes to our results, even though Romania had the highest employment rate, the public expenditure on education of that country is very low. Actually, Romania is an exceptional case because, even though the unemployment rate of that country around 3. 46 per cent was lower when compared with an average of 8. 3 per cent in the euro area due to the huge labour market of that country, the level of government expenses allocated to the education sector and curricula considered outside the needs of the economy and the quality of the education is also very low.
Therefore, let us consider countries like Sweden and Finland instead of Romania which have next highest employment rates. If we consider about these countries, both the employment rate as well as the government expenses on education are in higher level. Further, Croatia the country which has lower employment rate, has the lowest amount of government expenses on education as well. Therefore, we can conclude that there is a positive relationship between employment rate and government expenditure on education from this map.
This dual axis chart shows the relationship between the total employment rate and GDP per capita of 28 countries which belong to European Union during the time period from 1960 to 2017. Blue color bars represent the total employment rate in each year and orange color line represent the total GDP per capita in each year.
If we consider about the employment rate, we can clearly see that the employment rate has been increased throughout the time period and GDP per capita which measures the wealth of a nation has been also gradually increased during this time period. But we can see there is a decline in both GDP per capita and employment rate in 2009 due to the Financial Crisis of Europe in 2008 which caused a significant decline in the GDP of the majority of the European economies. But after that year, both employment rate and GDP per capita started to increase again.
According to these results we can clearly conclude that there is a positive relationship between GDP per capita and employment rate. In other words, higher GDP per capita indicates that the performance of that economy is in a good position and the state of living of that country is in high standard. When it comes to the European Union, the economy of the European Union consists of an internal market of mixed economies based on free market and advanced social models and this may be the most possible reason for continuous increase in both GDP per capita and employment rate in European Union.
