ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -However, too much GDP growth is also dangerous, as it will most likely come with an increase in inflation, which erodes stock market gains by making our money (and future corporate profits) less valuable.

Detailed explanation-2: -A very low a rate of unemployment, however, can have negative consequences, such as inflation and reduced productivity. When the labor market reaches a point where each additional job added does not create enough productivity to cover its cost, then an output gap, or slack, happens.

Detailed explanation-3: -In general accepted theory, when the growth rate of a country’s economy increases, it is expected that employment will increase and the unemployment rate will decrease.

Detailed explanation-4: -Unemployment adversely affects the disposable income of families, erodes purchasing power, diminishes employee morale, and reduces an economy’s output.

Detailed explanation-5: -Consider a recession, a period of low economic activity. With lower demand for goods and services, firms start laying off workers and at the same time refrain from raising prices. So unemployment rises and inflation falls during recessions.