Unemployment is economic growth in the country; it increases

Unemployment
is has huge importance among the macroeconomic problems. . If unemployment is
experienced in any country, it will not only have an effect on the economic
indicators of this country, but will also damage the social values of such
country. In case of Pakistan; the unemployment was 3.14 percent in 1973; it
increased to 3.7 percent in 1980, then it started declining and became 2.55
percent in 1989. After the year 1989; the unemployment started increasing and
it reach to its highest stage 8.64 percent in 2003. Afterwards, the unemployment
rate reaches to 5.34 percent in 2010

Apart
from unemployment; inflation is a further macroeconomic issue that damages both
economic and social indicators in any country. Pakistan economy has also come
with this large economic problem. . The inflation rate was 23.07 percent in
1973. This year, it increased 26.66 percent in 1974, and it started and in the
year 1980 was 11.94 percent, and afterward this year reached 7.84 percent in
1989. After year 1989, the inflation in the year 2003 was 2.91% and in the year
2010 it reached 13.88 percent. The inflation changed every year and followed
both trends and downwards.

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The
real per capita GDP is used as proxy for economic development in this study. It
is generally considered that when there is economic growth in the country; it
increases the speed of economic activity in the country, which leads to
increasing employment.
Increase in employment Increases the power of people’s
purchasing of people in the country and as a result, consolidation consumption
is increasing, in which overall demands are increased and inflation in the
country is increasing Real percentage was GDP. 15025.8 years in 1973; it became
rupees 17561.04 years in 1980, it went up to Rs. In the year 23244.33 years
1990, the above trend continues. In the year 2000, 26474.2 and finally it has
reached the rupee. In the year 2010, 34588.9

The
association between inflation and unemployment is a relationship which has got
a great fame in the literature. The studies like Rogerson’s (1988); Cooley and
Hansen (1989), Mortensen and Pissarides (1994), Shi (1997), Pissarides (1999),
Berentsen, Lagos and Wright (2005), Lehmann (2006), Beyer and Farmer (2007),
Kumar (2008), Berentsen, Menzio andWright (2008), and Menzio and Wright (2008)
have found a positive relationship between inflation and unemployment in the
long run.

On the other hand; Karanassou, Sala and Snower (2003), Franz
(2005), and Schreiber and Wolters (2007) had found an converse relationship
between inflation and unemployment in the long run.another, the relationship
between economic growth and unemployment, has got huge name in the studies of
macroeconomics .The studies like Vandemoortele (1991); Oladeji (1994), Umo
(1996), Rama (1998), Silvapulle et al (2004) and Stephen (2012) have found an
inverse relationship between economic growth and unemployment for different
periods for the different countries respectively. It’s based on argument; this
study is expected at finding empirically the impact of inflation; trade
openness, economic growth and urban population as share of total population on
unemployment in case of Pakistan for the period ranges from 1973 – 2010.

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