An economy can simply be defined as a society that attempts to best satisfy its infinite needs and wants with its available resources (Parry & Kemp,2002). However, people have unlimited wants and needs but the resources are scarce. As such economics is about managing demand and supply within an economy to achieve the best possible satisfaction and to ensure maximum utilization of the resources. Unfortunately it is not as easy as it sounds. There often are many complications and problems when it comes to running an economy well. For this essay we will look into unemployment, its causes and implications. Unemployment in Australia is a situation in the labour market where people are actively seeking a job at current wage rates but are unable to find one. Strictly speaking unemployment can refer to any factor of production: land, labour capital and enterprise. But this term is usually referred to as labour.
There are many types of unemployment but they all fall within two categories, Voluntary unemployment and involuntary unemployment. Unemployment can have detrimental effects to the economy and as such government intervention is often required to curb this problem. There are a few types of policies that the government implements, fiscal and monetary policies are probably the most used amongst others. (Lewis. P, Garnett. A, Hawtrey. K, Treadgold. M, 2003)
Before we can explain how and why unemployment brings about economic costs, we need to further understand the economy and how we measure its performance. Economic growth is said to have occurred when an economy can better satisfy the wants and needs of its community. One way of measuring economic performance is by the use of the Gross Domestic Product (GDP). The GDP is simply an economy's annual total worth of all products and services made that year. (G.