ECON 2 Lecture Notes - Lecture 21: Business Cycle, Kenyan Shilling, Potential Output
27 Aug 2020
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Document Summary
Devaluation makes a country"s exports cheaper in terms of foreign currency and its imports more expensive in domestic currency. Suppose that uganda shilling exchange rate is ksh 1 . A kenyan sugar producer who sells sugar at ksh 20 / kg. will charge ush 200 r/kg. This is meant to increase exports and reduce imports: unemployment. Unemployment refers to a situation where individuals that are supposed to be used in production are willing and able to be employed at the existing wage rates, but are unutilized or underutilized. This is where people who are not working and are able to work at the existing wage rate cannot get jobs. From the above diagram, it can be observed that: People who are not working (n1 n0) have same qualifications as those who are working (on0). Wage rate is rigid due to imperfections in the labour market, e. g. government"s minimum wage rate, presence of labour unions, etc: open voluntary unemployment.
