Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

structural, and cyclical. 
 
Frictional unemployment refers to the incongruence between 
demand for and supply for labor. 
Seasonal unemployment occurs when industries have slow 
season, as of the case of construction workers. 
Structural unemployment an imbalance between the kinds of 
employees the employers are looking for and the kinds of workers 
looking for jobs. 
Cyclical unemployment lack of demand for labor result On the 
other hand, inflation, as defined by the dictionary, is an increase in 
the supply of currency or credit relative to the availability of goods 
and services, resulting in higher prices and a decrease in the 

---

purchasing power of money. Inflation may initially be good but it 
may disrupt normal economic activities. 
The problem of modern governments is how to get the 
benefits of economic flexibility and rising productivity while reducing 
the number of unemployed workers, keeping their spells of 
joblessness short, maintaining their income, and helping them 
return to work with viable skills. 
There are two further arguments for government intervention: 
 
Income distribution 
The fact the economy is Pareto efficient says nothing about 
the distribution of income; competitive markets may give rise to a 
very unequal distribution, which may leave some individuals with 
insufficient resources on which to live. This is one of the most 
important activities of the government such as food stamps and 
Medicaid. 
From concern that individuals may not act in their own 
best interest. 
An individual‘s perception of his own welfare may be 
unreliable criteria on for making welfare judgments. Even fully 
informed consumers may make ―bad‖ decisions.