Macroeconomic Stabilisation in Regards to Labor Market Essay

Macroeconomic Stabilisation in Regards to Labor Market - Essay Example 139 – 140). Aside from believing that there is a perfect labour market among the firms, employers and employees, classical economists assumed that equilibrium within the labour market is possible because of the presence of monetary wages or wage-price flexibility that could make supply and demand curve adjust with the changes in labour markets in order to remove or eliminate the presence of excessive supply and demand for labour (Rossana, 2011, p. 370; Gupta, 2008, p. 273; Ahiakpor, 2003, p. 160). Given that there is profit maximization or profit seeking behaviour on the part of the local business group; demand for labour is often represented by a downward-sloping curve since these companies are less likely to employ a lot of high-paid employees as compared to low-paid employees (Rossana, 2011, p. 370). On the other hand, the aggregate supply curve for labour is represented by a vertical curve (Rossana, 2011, p. 371). Specifically the classical theory on labour market is often based on the Walras’ and Say’s law which strongly suggests the idea that the labour supply is capable of creating its own demand through the use of price or wage adjustments (Gupta, 2008, p. 273). Likewise, the issue on real wage and employment level is determined by the movements in the supply and demand curve within the labour markets. Contrary to the beliefs of Keynesian economists, classical theorists strongly believe the presence of unemployment rate is a result of unforeseen economic disturbance which can be easily solved as soon as an adjustment between the supply and demand curve occurs. Since the presence of job-seekers who refuse to accept lower wage rate are classified as ‘voluntary’ unemployment, classical economists assume that there is always full employment in...This essay offers a comprehensive analysis of macroeconomic concepts that characterize economic conditions in the labour market. This paper makes use of economic principles and theo ries in discussing why aggregate labor market as a clearing market is difficult to achieve. In the study of macroeconomic theories, the interrelation between the labour markets, the goods market, money market, and the foreign trade market is being taken into consideration in order to determine the interaction between the levels of employment, employees’ participation rate, aggregate income, and gross domestic product. In a market clearing situation, the quantity of labour demanded is expected to be equal to the quantity of labour services supplied by the employers. Aside from believing that there is a perfect labour marketclassical economists assumed that equilibrium within the labour market is possible because of the presence of monetary wages or wage-price flexibility that could make supply and demand curve adjust with the changes in labour markets in order to remove or eliminate the presence of excessive supply and demand for labour. The labour market will remain unclear because of imperfect labour market conditions which is often triggered by the presence of economic factors that continuously affect the movements in the supply and demand curve in labour markets. The study of macroeconomics in labour market strongly suggest that full employment is close to impossible to achieve, because of the presence of macroeconomic factors.