Bangladesh. Most government aim for full employment and stable prices. Which of those two aims should your government seek to achieve in the coming year

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7. Most government aim for full employment and stable prices. Which of those two aims should your government seek to achieve in the coming year and how might this choice affect the other aim?

A. Full employment is the level of employment a country achieves when there exists no involuntary unemployment in the economy. Stable prices means that the general price levels of an economy remains constant.

However, these two variables often conflict with one another because to bring about changes in one of them the other objective must be sacrificed.

To eradicate involuntary unemployment i.e. cyclical unemployment, structural unemployment; it is necessary to sustain aggregate demand (AD) and the same production structure in the economy. However sustaining AD will not allow general price levels to remain and structural changes must occur to help the economy diversify, develop and use its resources to its most potential use.

Bangladesh is a developing economy and initially had is industries directed and managed by the central state after the country won its independence. But despite three decades of independence, the country still faces various crises such as underemployment and rising inflation. The industries of the country also faced large structural changes and demand shocks alongside damages caused by natural disasters.

Jute production was a main source of income for the rural workers, which makes up majority of the population, until there was a reduction on world demand for jute which has been replaced by synthetic materials. Hence the output of jute fell with the reduction of demand and hence many workers who specialized in jute cultivation and crafts were made redundant.

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Though, Bangladesh managed to revive the downfall of the agricultural sector by increasing rice production. This was assisted by government subsidies, loans facilities provided by foreign non-government organizations (the NGOs). Therefore the opportunity was taken by the rural population to increase rice production. This also attracted more labor to acquire cultivation skills to start rice production. However over the years Bangladesh is again faced with unemployment problems because there is now a large population of landless formers.

Although Bangladesh is a less developed country, private investors managed to create successful industries of textiles and pharmaceuticals both of which provided new ...

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