nemployment Main article: Unemployment The rate of unemployment can have a major effect on the economy.

The amount of unemployment in an economy is measured by the unemployment rate, the percentage of workers without jobs in the labor force. The labor force only includes workers actively looking for jobs.

The level of unemployment varies with economic conditions and other circumstances.

Monetary Policy simple e!ample of monetary policy is the central bank"s open#market operations. $hen there is a need to increase cash in the economy, the central bank will buy government bonds %monetary e!pansion&. These securities allow the central bank to inject the economy with an immediate supply of cash. 'n turn, interest rates, the cost to borrow money, will be reduced because the demand for the bonds will increase their price and push the interest rate down. .

(n the other hand, when the central bank needs to absorb e!tra money in the economy, and push inflation levels down, it will sell its T#bills. This will result in higher interest rates %less borrowing, less spending and investment& and less demand, which will ultimately push down price level %inflation& )emand and )isposable 'ncome $hat ultimately determines output is demand. )emand comes from consumers %for investment or savings # residential and business related&, from the government %spending on goods and services of federal employees& and from imports and e!ports.

, so in order to determine demand, a consumer"s disposable income must also be

measured. This is the amount of money after ta!es left for spending and*or investment.

what is capacity utilisation in economic analysis+ ,apacity utilisation is the percentage of the firm-s total possible production capacity that is actually being used.

,apacity utilisation is calculated as follows:

,apacity utilisation %.& /

actual output per month %or per annum& ! 011.

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ma!imum possible output per month %or per annum&