Discuss the effects of the measures to curb inflation on employment of factors of production.
- A tight monetary policy in form of increase in bank rates; increase in reserve ratio and selling securities to the public will lead to less money in circulation, and with less money in circulation means that saving will be low leading to unemployment of labour force in the country
- Re-organization of distribution channels of goods in form of rationing of scarce commodities will discourage the business community who are after profit maximization hence the entrepreneurs decline to invest in such venture
- Reduction of government expenditures on productive sectors reduce employment especially in LDCs where government is the major employer of labour force
- Price and income policies in form of wage control leads to brain drainage hence leading to low production of goods and control of prices of goods will result into losses by the entrepreneurs as the inflation could have been as a result of high prices of inputs imported.
- Production policy in form of provision of subsidies to producers of scarce commodities, removing bottlenecks and improving transport will lead to high production which entails increased employment of the factors of production
- Using inflationary policies such as increase in credit to expand investment in controlling inflation can instead worsen matters as there could be too much money in the circulation that cannot be controlled, so this discourages investment by entrepreneurs.
- Postponement of debt repayment discourages donors availing grants that promote vital ventures such as infrastructure and health leading to low production of goods
- Reduction of propulsion growth rate to fight excessive demand could to reduction in labour force hence leading to low production
- If maximum prices are fixed below the equilibrium process, the entrepreneurs are discouraged from employing factors of production
CATEGORIES Economics
TAGS Dr. Bbosa Science
