Economics

Frictional unemployment is very important in any economy. This type of unemployment takes place when people leave their old jobs for new ones. It is human nature to look for the next best thing. With the gradual increases in cost of living individuals need to look for new jobs that pay more. These individuals can be recent university graduates that used to work at fast food restaurants who are now ready to put their business degrees to work, to those individuals already in a job who need some time off to transition to a new job. Frictional unemployment can also take place if a company does not want to hire applicants because they do not believe they have received any qualified applications. When this happens the position stays vacant until a qualified individual is found. So, without frictional unemployment people would have to barter for their next job. Everyone would be in a job and no one would have to look for one. Could you imagine having to wait for someone to die to move up the ladders of success or you would actually have to have a job that both participants want so you can each swap with one another. I do not see this as an ideal situation so, yes, it is important to have frictional unemployment in any economy. The reason the United States has free trade between its own 50 states is because we all are on the same domestic market. Wages within the United States are reasonably close in pay and benefits. Since everyone uses the dollar as currency we do not have to worry about an exchange rate which helps keeps the values of the products within our boundaries all the same. We do not have to worry about one state trying to bankrupt an industry in another state just because they are competing businesses. Since our labor cost the same in most states this keeps an even keel on the market goods. If we allowed free trade amongst other countries we may become victim of dumping. This takes place when another country sells us goods at prices which are below their “actual” cost of production (Ebling, 1991). The purpose of this action would be to damage the economy of the US, so that these international firms could later come back and charge us more than they had previously because our own companies will not have been able to stay in business and compete with the lower prices. Free trade is a great idea if we all work off of the same currency and play by the same rules. The ability to convince all nations to play by the same rules would greatly benefit free trade. At the same time we have the ability to lose our sovereignty as a country. This is why free trade is important within our borders but to extent no further. “A tariff is a tax on imports” (Stone, 2008, p. 662). Tariffs are imposed by governments on imports from other country’s goods. The reason to place a tariff is if a business is too young to mature or they have not had a good market to develop in. If the U.S. placed a tariff on French and German wine, our government would be the first one to make a substantial income off of these tariffs. The government would benefit greatly by the amount of revenues it would collect. Their revenues would be affected by the means in which they apply it; they could either have ad valorem taxes, or they could charge unit taxes. These tariffs would benefit the domestic farmers because they could now charge more for their product and their sales would increase at the same time. While the domestic farmers are enjoying their increases, the domestic customer would be hurt. Because the domestic farmers raised their prices, the domestic consumers now have to pay the increases. Yes, the tariffs have helped the local farmers and the government, but has it done justice to the domestic customer' This is where our government really needs to look at the long term benefits. Does it need to help the local businesses thrive or do they need to help the citizens save more of their discretionary spending' REFERENCE Stone, G. (2008). Core Economics. New York: Worth Publishers. Bodman, P. (1999) Labor market inefficiency and frictional unemployment, Retrieved Feb 1, 2010 from http://www.questia.com/googleScholar.qst;jsessionid=LvFHDHhCQ4JJfw6DBYybxGrjMGzJ2yDVz7mpKMT4HJB8cCt5P619!1320305757!2144018255'docId=5001850083 Thoma, M. (2009) ‘New Normal’ for Unemployment', Retrieved Feb 1 2010 from http://www.angrybear.com/2009/11/new-normal-for-unemployment.html Ebeling, R. (1991) Free Trade versus Protectionism, Retrieved Feb 2 2010 from http://www.fff.org/freedom/0191b.asp