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IDE ENGINEERING REPORTS

THE EFFECT OF UNEMPLOYMENT AND INFLATION ON


ECONOMIC GROWTH IN NORTH SUMATERA
Arranged to fulfill one of the Business English assignments
Lecturer : Gary Choms GT Sibarani, SE, S.Pd, M.Sc, Ak, CA.

ARRANGED BY
GROUP 5 :
NAMA NIM
Lily Handayani 7183540003
Puspa Mahardhika 7183540001
Elsa Yunita Tarigan 7183540007

ECONOMICS SCIENCE B

ECONOMICS SCIENCE STUDY PROGRAM


FACULTY OF ECONOMICS
STATE UNIVERSITY OF MEDAN
FEBRUARY 2019
FOREWORD

Thank you, we pray to God Almighty for his blessings and mercy, we can complete our
project entitled "The Influence of unemployment and inflation on economic growth in North
Sumatra".
The preparation of this project we realize that the smooth preparation of this project is
thanks to the help and motivation of various parties. Therefore we would like to express our
gratitude to those who have helped in the smooth preparation of this project.
In preparing the project, we have tried to present the best. We hope that this project can
provide information and has value for all parties. By reading and discussing this project, it is
expected that the readers are expected to understand the charismatic leadership.

Medan, May 10, 2019

Author

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TABLE OF CONTENTS

INTRODUCTION ............................................................................................................ 1
TABLE OF CONTENTS ................................................................................................. 2
CHAPTER I INTRODUCTION ...................................................................................... 3
A. Background ................................................................................................................. 3
B. Problem Formulation ................................................................................................... 3
C. Purpose of Discussion ................................................................................................. 3
CHAPTER II STUDY OF LITERATURE ...................................................................... 4
CHAPTER III STEPS .................................................................................................... 12
A. Steps to Overcoming Unemployment ....................................................................... 12
B. Steps to Overcoming Inflation .................................................................................. 13
C. Steps to Increase Economic Growth ......................................................................... 15
CHAPTER III CLOSING .............................................................................................. 19
A. Conclusion ................................................................................................................ 19
REFERENCES .............................................................................................................. 20

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CHAPTER I
PRELIMINARY
A. Background
Economic development is essentially a series of policy efforts that aim to improve people's
living standards, expand employment opportunities and direct the distribution of income equally.
The problem of employment or unemployment is a problem that is very difficult to avoid by a
country or region and can cause social problems such as criminal acts and economic problems.
This condition can reduce the level of welfare and purchasing power of the people. The lower the
unemployment rate the more prosperous the life of the people of a country, and vice versa.
A country is considered successful or not in solving its own country's economic problems
can be seen from the country's macro and micro economy. Macroeconomics is a study of activities
that discuss the economy of a country. One of the macroeconomic indicators used to see / measure
a country's economic stability is inflation. Changes in this indicator will have an impact on the
dynamics of economic growth. In an economic perspective, inflation is a monetary phenomenon
in a country where inflation fluctuations tend to result in economic turmoil. Inflation is a
phenomenon where the general price level increases continuously.
B. Problem Formulation
1. How is the conception of unemployment against economic growth in North Sumatra?
2. What is the conception of inflation?
3. How is the relationship between unemployment and inflation to economic growth?
C. Purpose of Discussion
1. Knowing the conception of unemployment against economic growth in North Sumatra
2. Knowing the conception of inflation
3. Knowing the relationship of unemployment and inflation to economic growth

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CHAPTER II
LITERATURE REVIEW
A. Theoretical Concepts
1. Unemployment
Unemployment or unemployment (English: unemployment) is the term for people who do
not work at all, are looking for work, work less than two days a week, or someone who is trying
to get a decent job. Unemployment is generally caused by the number of workforce or job seekers
is not proportional to the number of jobs that are able to absorb it. Unemployment is often a
problem in the economy, because with unemployment, people's productivity and income will
decrease so that it can cause poverty and other social problems. Job search (English: job search) is
the process of matching workers to suitable jobs.
The unemployment rate is the percentage of those who want to work, but do not have jobs.
The unemployment rate is obtained through a survey of thousands of households. The
unemployment rate can be calculated by comparing the number of unemployed with the number
of labor force expressed in percent. The absence of income causes unemployed people to reduce
their consumption expenditure which causes a decrease in the level of prosperity and prosperity.
Prolonged unemployment can also have a bad psychological effect on the unemployed and their
families. Too high unemployment can also cause political security and social chaos that disrupts
economic growth and development. The long-term consequences are a decrease in gross national
product (GNP) and a country's per capita income. In developing countries such as Indonesia, the
term "covert unemployment" is known where fewer jobs can be done by more people.
The amount of unemployment is usually in line with the increase in population and is not
supported by the availability of new jobs or reluctance to create jobs (at a minimum) for themselves
or indeed it is not possible to get employment or not to create jobs. Actually, if someone creates
jobs, creating jobs (at a minimum) for themselves will have a positive impact on other people as
well, for example, from some of the results obtained can be used to help others even a little. In a
developed economy, most people who become unemployed get jobs in a short time. Even so, most
of the unemployment observed in a certain period can be caused by a group of people who have
not worked for a long time.
Based on working hours, unemployment is grouped into 3 types:
• Disguised unemployment is a workforce that does not work optimally for a certain reason.
• Underemployed unemployed are workers who do not work optimally because there are no jobs,
usually these underemployed workers are workers who work less than 35 hours a week.
• Open unemployment is a workforce that truly does not have a job. This type of unemployment
is quite a lot because it has not yet got a job even though it has tried its best.
Unemployment is generally caused because the workforce is not proportional to the number of
jobs that can absorb it. Unemployment is often a problem in the economy because with the

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unemployment, productivity and income of the people will decrease so that it can cause poverty
and other social problems.
The unemployment rate can be calculated by comparing the number of unemployed with the
number of labor force expressed in percent.
The absence of income causes unemployed people to reduce their consumption expenditure
which causes a decrease in the level of prosperity and prosperity. Prolonged unemployment can
also have a bad psychological effect on the unemployed and their families. Too high
unemployment can also cause political, security and social chaos that interferes with the
development process.
2. Inflation
In economics, inflation is a process of increasing prices in general and continuously related
to market mechanisms that can be caused by various factors, including, increased public
consumption, excess liquidity in the market which triggers consumption or even speculation to
include also due to the inability of distribution of goods. [1] In other words, inflation is also a
continuous process of decreasing the value of a currency. Inflation is the process of an event, not
the price level. That is, the price level that is considered high is not necessarily indicative of
inflation. Inflation is an indicator to see the rate of change, and is considered to occur if the process
of price increases takes place continuously and influences each other. The term inflation is also
used to mean an increase in the money supply which is sometimes seen as the cause of rising
prices. There are many ways to measure inflation, the two most commonly used are the CPI and
GDP Deflator.
Inflation can be classified into four categories, namely mild, moderate, severe, and
hyperinflation inflation. Mild inflation occurs when the price increase is below the 10% a year;
moderate inflation between 10% -30% a year; weighs between 30% -100% a year; and
hyperinflation or uncontrolled inflation occurs when the price increase is above 100% a year.
Inflation can be caused by two things, namely the pull of demand (excess liquidity / money
/ currency) and the second is the pressure (pressure) of production or distribution (lack of
production (product or service) and / or also the lack of distribution). ] The first cause is more
influenced by the role of the state in monetary policy (the Central Bank), while the second cause
is more influenced by the role of the state in executor policies which in this case are held by the
Government (fiscal) (taxation / levies / incentives / disincentives) , infrastructure development
policies, regulations, etc.
Demand inflation (Ingg: demand pull inflation) occurs due to excessive total demand which
is usually triggered by a flood of liquidity in the market resulting in high demand and triggering
changes in the price level. Increasing the volume of exchange instruments or liquidity associated
with the demand for goods and services results in increased demand for these factors of production.
Increasing demand for factors of production then causes factor prices to increase. So, this inflation
occurs because of an increase in total demand when the economy in question is in a full
employment situation where it is usually more due to the stimulation of excessive market liquidity

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volume. The flood of liquidity in the market is also caused by many factors besides the main one,
of course, the ability of the central bank to regulate the circulation of money, central bank interest
rate policies, and even speculation in the financial industry sector.
Cost push inflation (Ingg: cost push inflation) occurs due to a scarcity of production and /
or also including a scarcity of distribution, although demand in general there is no change that
increases significantly. The inability of this distribution flow or reduced production available from
the average normal demand can lead to price increases in accordance with the law of supply-
demand, or also because of the formation of a new economic value position on the product due to
the new pattern or scale of distribution. Reduced production alone can occur due to various things
such as technical problems in production sources (factories, plantations, etc.), natural disasters,
weather, or scarcity of raw materials to produce such production, speculation actions (hoarding),
etc., thus triggering scarcity of production related on the market. Likewise the same thing can
happen to distribution, where in this case the infrastructure factor plays a very important role.
Increasing production costs can be caused by two things, namely: price increases, for
example raw materials and increases in wages / salaries, for example salary increases for civil
servants will result in private efforts to increase the price of goods.
Based on its origin, inflation can be classified into two, namely inflation originating from
within the country and inflation originating from abroad. Inflation comes from within the country
for example due to the budget deficit financed by means of printing new money and the failure of
the market which results in expensive food prices. Meanwhile, inflation from abroad is inflation
that occurs as a result of rising prices of imported goods.
This can occur due to high production costs of foreign goods or an increase in goods import tariffs.
Inflation can also be divided based on the size of the influence on prices. If the price increase
is only related to one or two specific items, inflation is called closed inflation. However, if price
increases occur in all goods in general, then inflation is referred to as Open Inflation. Whereas
when the inflation attack is so great that at any time prices continue to change and increase so that
people cannot hold money longer because the value of money continues to decline is called
uncontrolled inflation (hyperinflation).
Based on the severity of inflation can also be distinguished:
1. Mild inflation (less than 10% / year)
2. Moderate inflation (between 10% to 30% / year)
3. Heavy inflation (between 30% to 100% / year)
4. Hyperinflation (more than 100% / year)
Inflation has a positive impact and the negative impact depends on the severity or not of
inflation. If inflation is mild, it has a positive influence in the sense that it can encourage the
economy better, namely to increase national income and make people excited to work, save and
invest. Conversely, in times of severe inflation, which is when inflation is uncontrolled

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(hyperinflation), the economy becomes chaotic and the economy feels sluggish. People become
less eager to work, save, or invest and produce because prices increase rapidly. Recipients of fixed
income such as civil servants or private employees and workers will also be overwhelmed to bear
and compensate for prices so that their lives will decline and deteriorate over time.
For people who have a fixed income, inflation is very detrimental. We take the example of
a retired civil servant in 1990. In 1990, his pension was enough to make ends meet, but in 2003 —
or thirteen years later, the purchasing power of his money might only be half. That is, his pension
is no longer enough to meet his life needs. Conversely, people who rely on profit based income,
such as entrepreneurs, are not harmed by inflation. So is the case with employees who work in
companies with salaries following the inflation rate.
Inflation also causes people to be reluctant to save because the value of the currency
decreases. Indeed, savings generate interest, but if the inflation rate is above interest, the value of
money still decreases. If people are reluctant to save, the business and investment world will be
difficult to develop. Because, to develop the business world requires funds from banks obtained
from community savings.
For people who borrow money from banks (debtors), inflation is profitable, because when
paying debt to creditors, the value of money is lower than when borrowing. Conversely, creditors
or parties who lend money will suffer losses because the value of return money is lower than when
borrowing.
For producers, inflation can be profitable if the income earned is higher than the increase in
production costs. If this happens, the producer will cause production costs to rise to the point that
eventually it will harm the producer, the producers are reluctant to continue production.
Manufacturers can stop their production temporarily. In fact, if it is unable to keep up with the
inflation rate, the business of the producer may go bankrupt (usually occurs in small
entrepreneurs).
In general, inflation can result in reduced investment in a country, encourage an increase in
interest rates, encourage speculative investment, failure to implement development, economic
instability, balance of payments deficits, and a decline in the level of life and welfare of the people.
3. Economic growth
Economic growth is the process of continuously changing a country's economic condition
towards a better condition for a certain period. Economic growth can also be interpreted as a
process of increasing the production capacity of an economy which is realized in the form of an
increase in national income. The existence of economic growth is an indication of the success of
economic development in people's lives. Economic growth shows the growth in the production of
goods and services in the area of the economy within a certain time interval. The higher the level
of economic growth, the faster the process of increasing regional output so that the prospects for
regional development are getting better. Knowing the sources of economic growth can determine
the priority development sector. According to Todaro and Smith (2004) there are three main factors
or components that influence economic growth, namely capital accumulation (capital

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accumulation), population growth (grawth in population), and technological progress
(technological progress).
Historical Economic Growth Theory
This theory was put forward by several experts as follows:
• Werner Sombart (1863-1947)
According to Werner Sombart, a nation's economic growth can be divided into three levels:
o The economy is closed
At this time, all human activities are solely to fulfill their own needs. Individuals or communities
act as producers as well as consumers so that there is no exchange of goods or services. The
pererokoniam period has characteristics:
1. Human activities to meet their own needs
2. Every individual as a producer as well as a consumer
3. There is no exchange of goods and services
o The period of crafts and carpentry
At this time, human needs are increasing, both quantitatively and qualitatively due to the
development of civilization. The increase in these needs cannot be fulfilled by itself so that the
division of labor is in accordance with their respective expertise. This division of labor leads to
the exchange of goods and services. The exchange of goods and services at this time has not been
based on the purpose of seeking profits, but solely to meet each other's needs. The period of crafts
and carpentry has the following characteristics:
• Increased human needs
• The division of tasks according to expertise
• The emergence of exchange of goods and services
• Exchange has not been based on profit motives
o Capitalist period
At this time the capitalists emerged. In carrying out its business the capitalists need workers
(workers). Production carried out by capitalists is no longer just fulfilling its needs, but has been
aimed at making a profit. Werner Sombart divides the capitalist period into four periods as follows:
o Pre-capitalist level
This period has several characteristics, namely:
1. Community life is still static
2. Family

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3. Relies on the agricultural sector
4. Work to meet your own needs
5. Live in groups
o Capitalist level
This period has several characteristics, namely:
1. Community life is dynamic
2. Individual
3. The division of labor
4. There is an exchange for profit
o The level of capitalism is great
This period has several characteristics, namely:
1. His business is solely for profit
2. The emergence of capitalists who have the means of production
3. Production is done in bulk with modern tools
4. Trade leads to monopoly competition
5. In society there are two groups, namely employers and laborers
o The final level of capitalism
This period has several characteristics, namely:
1. The emergence of the flow of socialism
2. There is government interference in the economy
3. Prioritizing mutual interests
• Friedrich List (1789-1846)
According to the Friendrich List, a nation's economic growth can be divided into four stages as
follows:
1. The period of hunting and wandering
2. The period of raising and farming
3. The period of farming and crafts
4. Period of craft, industry, trade
• Karl Butcher (1847-1930)

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According to Karl Bucher, a nation's economic growth can be divided into four levels as follows:
1. The period of a closed household
2. City households
3. The nation's household
4. The world household
• Walt Whiteman Rostow (1916-1979)
W.W.Rostow revealed the theory of economic growth in his book entitled The Stages of Economic
Growth states that economic growth is divided into 5 (five) as follows:
o Traditional Society (The Traditional Society)
1. It is a society that has a developmental structure in limited production functions.
2. There is no modern science and technology
3. There is a limit on the level of output per capita that can be achieved
o Community pre conditions for takeoff period (the preconditions for take off)
1. It is the level of economic growth where the community is in the process of transition.
2. It has begun to apply modern science into new production functions, both in agriculture and in
the industrial field.
o Takeoff period (The take off)
1. It is the time interval needed to break the barriers to sustainable growth.
2. Strengths that can encourage expanded economic growth
3. Effective investment rates and production levels can increase
4. Effective investment and productive savings increase or more than the national income.
5. New industries are growing rapidly and existing industries are expanding rapidly.
o Motion Towards Maturity
1. It is a continuous development in which the economy grows regularly and the business fields
expand with the application of modern technology.
2. Effective investment and savings increase from 10% to 20% of national income and this
investment takes place quickly.
3. Output can exceed the first total population
4. Items that were previously imported can now be produced on their own.

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5. The level of the economy indicates that capacity moves beyond the industrial strength at the
time of take-off with the application of modern technology
o High mass consumption
1. Industrial sectors are the leading sectors (leading sectors) moving towards the production of
durable consumer goods and services.
2. The real income per capita always increases so that most people reach a level of consumption
that exceeds the basic food, clothing, and food needs.
3. Full employment opportunities so that national income is high.
4. High national income can meet high consumption levels
Classical and Neo Classical Theory
• Classical Theory
o Adam Smith
Adam Smith's theory assumes that economic growth actually relies on population growth.
With the increase in population, there will be an increase in output or yield. Adam Smith's theory
is contained in his book entitled An Inquiry Into the Nature and Causes of the Wealth of Nations.
o David Ricardo
Ricardo argues that the factor of population growth that is getting bigger to double at one time will
cause an abundant amount of labor. Excess labor will result in wages falling. The wage can only
be used to finance the minimum living standard so that the economy will be stagnant (statonary
state). David Ricardo's theory is outlined in his book entitled The Principles of Political and
Taxation.
• Neoclassical Theory
o Robert Solow
Robert Solow argues that economic growth is a series of activities sourced in humans, capital
accumulation, use of modern technology and results or output. The population growth can have a
positive impact and can have a negative impact. Therefore, according to Robert Solow, population
growth must be used as a positive resource.
o Harrord Domar
This theory assumes that capital must be used effectively, because economic growth is strongly
influenced by the role of capital formation. This theory also discusses national income and
employment opportunities.

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CHAPTER III
STEPS

A. Steps to Resolve Unemployment Problems


The problem of unemployment in each country cannot be underestimated, including in Indonesia.
The Central Statistics Agency (BPS) explained that there was an increase in the number of
unemployed people in 2017, which amounted to 10 thousand people to 7.04 million people in
August 2017 from August 2016 of 7.03 million people.
Similar conditions also occur in a number of other countries. For this reason, the community hopes
that the government and private companies will immediately carry out various ways to deal with
effective unemployment, such as the following:
1. No Differentiation between Job Seekers
Not a few companies are reluctant to accept workers who are married and have children. For
example, by reason of companies having to pay for the insurance of their wives and children, or
having the risk that employees will often get permission because of the needs of their children or
family and so on.
2. Applying the Junior-Senior Team Concept
Young and old workers face the same problem in the labor market, namely high unemployment.
However, these two groups have different reasons. If young workers do not have work experience,
older workers begin to lose their productivity.
The solution to overcome this as well as the way to overcome unemployment, the next is to apply
the concept of the senior-junior team in which the two groups are combined into one. The skills of
young and old workers can complement each other so as to encourage the effectiveness of work
done.
In addition, young workers can provide support to seniors such as physical strength, language skills
or skills in the field of technology.
3. Opening New Jobs
The government and private companies are expected to be able to open new employment
opportunities to attract unemployed or new graduates to reduce unemployment.
4. Improve Macroeconomic Conditions
Economic growth will stimulate job creation and have a positive impact on unemployed young
people. The government must pay special attention to the industrial sector that is friendly to young
job seekers to produce a quality workforce.
5. Subsidies and Wage Tax Deductions

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One intensive form of government such as subsidies and a reduction in wage tax can help the
economy and industry sector in recruiting more employees.
6. Training and Education Program
Training and education programs with the aim of building skills and developing potential can help
reduce unemployment. Skilled workers have a greater chance of getting jobs than those without
skills.
7. New Standards for Work Experience
There needs to be an increase in opportunities for work experience for new students / graduates in
various industries. They must be involved in a number of different workplace environments to feel
the real world of work.

B. Steps to Resolve Inflation Problems


To overcome inflation, monetary policy is certainly used to reduce the money supply, which
includes:
1) Open Market Policy, namely the policy of the Central Bank to reduce the money supply by
selling SBIs (Bank Indonesia Letters). By selling SBIs, the Central Bank will receive money from
the public. Thus, the amount of money in circulation can be reduced.
2) Discount policy, namely the policy of the Central Bank to reduce the amount of money in
circulation by raising interest rates. By raising interest rates, it is hoped that the community will
save more in the bank. Thus, the amount of money in circulation can be reduced.
3) Cash Reserve Policy, namely the Central Bank's policy to reduce the money supply by
increasing minimum cash reserves. So, commercial banks must hold more money in the bank as a
backup. Thus, the amount of money in circulation can be reduced.
4) Selective Credit Policy, namely the policy of the Central Bank to reduce the money supply by
tightening credit terms. Terms of strict giving will reduce the number of entrepreneurs who can
get credit. Thus, the amount of money in circulation can be reduced.
5) Sanering, namely the policy of the Central Bank to cut the value of the domestic currency if the
country has experienced hyperinflation (inflation above 100%). By cutting the value of the
currency, the value of money in circulation can be reduced.
6) Attracting or exterminating old money, namely the Central Bank's policy of reducing the amount
of money in circulation by attracting or destroying old money such as coins of Rp. 5,000; Rp.
10.00 and Rp. 25.00 and Rp. 100.00 banknotes.
7) Limit printing of new money.
To overcome inflation the government must limit the printing of new money, so that the amount
of money in circulation does not increase.

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Fiscal Policy (Budget Policy)
Fiscal policy or budget policy is a policy carried out by the government by changing state revenues
and expenditures. To overcome inflation, the government can carry out fiscal policy as follows:
1) Reducing government spending.
To overcome inflation, the government can reduce spending so that demand for goods and services
decreases, which in turn can reduce prices.
2) Increase the tax rate.
To overcome inflation, the government can raise tax rates. An increase in tax rates will reduce the
level of public consumption. The reduced level of consumption will reduce the demand for goods
and services which can ultimately reduce prices.
Non-Monetary and Non-Fiscal Policies
In addition to monetary and fiscal policies, to overcome inflation the government can carry out the
following policies:
1) Add production.
To increase production, the government can provide subsidies and premiums or make regulations
that encourage entrepreneurs to become more productive so they can increase production. The
increase in production in the form of goods and services is expected to be able to offset the amount
of money in circulation.
2) Facilitate the entry of imported goods.
With the entry of imported goods, the number of goods entering the country has become more
numerous and is expected to be able to offset the amount of money in circulation. To facilitate the
entry of imported goods, it can be through a reduction in import duties and simplification import
rules.
3) Not importing goods from countries that are experiencing inflation. To prevent the transmission
of imported inflation, the government should not import goods from countries that are
experiencing inflation which generally sell goods at more expensive prices.
4) Set the maximum price.
In order for prices not to continue to rise, the government can apply maximum prices so that
producers (sellers) cannot sell above the maximum price.
5) Prohibiting stockpiling of goods that are usually done by traders.
Stockpiling of goods can cause scarcity of goods on the market, which triggers an increase in
prices. By prohibiting landfilling, it means preventing price increases.
6) Maintain a stable wage level.

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By maintaining a stable level of wages (not allowing wages to rise continuously) the increase in
production costs can be reduced. Thus, the government can prevent rising prices of goods. In this
case the government has prevented the occurrence of a Cost Push Inflation (inflation pushes
production costs, see again about the kinds of inflation

C. Steps to Increase Economic Growth


Economic growth is the goal that every country wants to achieve. In short, economic growth
is said to be getting better if the amount of production of goods and services continues to grow
over time. There are two indicators used to calculate the level of economic growth, namely:
1. GDP (Gross Dosmetic Product) Growth Rate
2. PNB Growth Rate (Gross National Product)
In addition there are several factors that influence economic growth in a country, including:
1. Natural resources
The natural resources of a country are God's gift to humans who live on their land. The
prosperity of a country can depend on the natural resources produced. But natural wealth alone
does not guarantee the welfare of its inhabitants. Good government and management policies are
needed so that natural resources are maximally processed and not over-exploited. Natural wealth
can be used for economic activities, for example the oil-producing country acts as an importer for
countries that do not have petroleum reserves. The results obtained will have an impact on
economic growth and increase national income.
2. Human resources
To increase economic growth, competent and reliable human resources are needed. A large
number of people who don't have skills, will has a negative impact on a country. Economic
problems that will arise such as an increase in the number of unemployed, employment dominated
by foreign workers, poor work productivity, and so on. Economic growth will increase sharply if
aided by massive and quality human resources. The qualified expertise possessed by the workforce
is expected to be able to boost the country's economy. For example, entrepreneurs with local start-
ups are opening up new employment opportunities so that the number of unemployed people will
decrease.
3. Investment (willingness / investment)
Capital is the basis for creating an economic activity. Without sufficient capital, the
economy will be stuck and the country will never develop. Capital can be obtained from
investments by investors. The more intense investment in a country in a project, the faster the
production of goods and services produced.
4. Progress of Science and Technology (Science and Technology)
The level of knowledge and technology possessed by a country plays a major role in
economic growth. For example, the Indonesian state only acts as a producer of raw materials for

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making automobiles and the Japanese state is in charge of processing and assembling them into a
car. Why can the Japanese state while Indonesia cannot? Everything returns to the advancement
of technology and science of Japanese residents who are able to create innovations and advanced
technology compared to our country. Inevitably science and technology are important factors that
help a country's economic growth.
5. Organization
Organizations here are a group created by individuals or groups that have the same purpose.
Organizations are very important to regulate the economic activities of the countries that join them.
For example, we know ASEAN organizations consisting of countries in Southeast Asia. One of
the aims of ASEAN is to increase the prosperity of its member countries by working together in
many fields. One example is a visa-free policy for all residents of member countries. This method
will increase income in terms of tourism and promote economic growth in the country.
6. Social and Cultural Status
In the midst of globalization and technological progress, social and cultural factors of the
population of a country still play a major role in creating economic growth. The positive side is
that individuals will be directed to stay away from bad deeds such as corruption adat, sometimes
they reject economic activity and are defensive about change.
7. Political situation
Politics in a country plays a major role in the smooth development and pace of the economy.
In a country that is at war, for example, it will hamper economic activity and make investors fail
to invest. A safe and stable country will drive the economy and create a safe situation for business
people.
Government Efforts to Improve Indonesia's Economic Growth
To improve sustainable economic growth government efforts are needed in developing all
aspects in it. In 2017 Indonesia's economic growth reached 5.07 percent with the consumer price
index inflation (CPI) reaching a low of 3.18 percent. Indonesia's economic growth is supported by
improving developed countries' economies and global community prices. From a domestic
perspective, the increase in performance was supported by increased investment and improved
exports.
In 2018, it is targeted that Indonesia's economic growth will be in the range of 5.1 to 5.5 percent.
The following is the government's efforts to improve the Indonesian economy.
1. Improving the quality of human resources
In 2018 the government poured a large investment to improve the quality of the Indonesian
human resources. The education budget this year reaches Rp.444 trillion, which is 20 percent of
the state budget. Not surprisingly, of the 250 million inhabitants, 60% are young people, which
are Indonesia's demographic bonuses. The government will move from providing facilities and
infrastructure in schools, the quality of teachers, adjusting school majors to industrial needs, and

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so on. It is expected that with improvements from upstream to downstream, the education of the
nation's children will increase and be able to compete with other countries. Do not let such large
domestic employment opportunities be taken by trained foreign workers with better skills than
Indonesian workers. Improvements in the employment system and income increases every year
are included in the IV economic policy package which is the focus of the government.
2. Increasing the number of entrepreneurs
Entrepreneurs are one of the creators of jobs that help drive the economy of a country. In
2017 the number of Indonesian entrepreneurs only reached 3.1 percent of the population. This
number is still far below neighboring countries such as Malaysia with a ratio of 5 percent and
Singapore at 7 percent. While developed countries such as Japan and the United States have an
entrepreneurial ratio that has skyrocketed to 11 and 12 percent. To increase the amount of
entrepreneurship the government strives to create low-cost credit schemes such as People's
Business Credit (KUR) with an interest rate of 9 percent, interest-bearing Revolving Fund
Management Institution (LPDB) 0.2-0.3 percent or Ultra Micro Credit that has a maximum loan
of 10 million. This is one of the ways the government attracts young people to start small
businesses even though they are still in college.
In addition, President Joko Widodo promised lower interest rates for micro, small and
medium enterprises (MSMEs) businesses to 12%, which had previously reached 22-23%. Giving
relief to labor-intensive industries is included in the VII economic policy package with PPh 21
which is the responsibility of the company.
3. Opening new jobs
According to Minister of Manpower Hanif Dhakiri, currently the number of unemployed
people in Indonesia reaches the lowest point of 5.5%. This is driven by the role of the education
sector that is able to create a workforce that has skills and is able to compete with foreign workers.
In addition, one way the government suppresses unemployment is to create an apprenticeship
program in the service sector and provide skills training. This method is an effort to facilitate the
workforce in the hope that the participants are skilled and professional when entering the labor
market. The government through the Department of Manpower and Transmigration continues to
strive and coordinate with the private sector in preparing qualified and ready labor to compete.
The development of informatics and internet technology helps create a start-up that creates new
jobs. Like new businesses in transportation services that provide opportunities for people to work
quickly and easily.
4. Increase investment
Investments that enter into a country are very meaningful to help development and
economic growth. Investment can be utilized by the government to improve infrastructure and
advance the standard of living of the Indonesian population. As ordinary people we can contribute
to the development of the country. The government prepares several strategies for ease of
investment in Indonesia, including:
• Facilitate the licensing process. Make use of internet technology with a fast licensing process

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• Optimizing tax allowances and tax holidays more quickly.
• Free up VAT (Value Added Tax) for the import of certain transportation equipment.
• Providing lower deposit interest taxes for exporters
• Full support from the regional government.
5. Boost the value of exports
In 2016, according to the Ministry of Trade, Indonesia's export rate decreased by 6.6% per
year. Currently the Indonesian government has special attention to five industrial sectors as export
orientations, including: oil and gas mining industry, agribusiness and fisheries, labor-intensive
industries, tourism and creative industries, and Indonesia's leading industries. To increase the value
of exports the government targets to expand the export market. Some things that can be done
include:
• Expand the export market to Africa, South America, Iraq, Bangladesh and India.
• Expanding to non-traditional markets.
• Product diversification, for example halal products, wood products.
• Providing incentives to MSME entrepreneurs. For example tax and promotion costs.
• Increase collaboration between regional and central government.
Cooperation between nations in the field of trade helped increase Indonesia's exports. For
example, market expansion through a Free Trade Agreement (FTA). In 2017 Indonesia has
established international trade cooperation with several countries, such as the European Union,
Australia, Japan, Pakistan, Iran and Chile.
6. Repairing infrastructure
The government continues to improve overall infrastructure development from Sumatra to
Papua. Poor infrastructure certainly affects the attractiveness of investment in Indonesia. Foreign
investors are certainly worried that investment in Indonesia will not run smoothly. Possible
obstacles such as high transportation costs, frequent power outages, are the government's
homework in providing adequate infrastructure for all parties.
Infrastructure improvement aims to cut logistical costs that are still very high. High logistics
costs will hamper the stretching of the economy in remote areas. The population that is followed
by the form of an archipelagic state is certainly a challenge for the government in infrastructure
development. So far, infrastructure provision has been slow because of various obstacles, such as
poor coordination, which has hampered project implementation.

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CHAPTER IV
COVER
A. CONCLUSION
Unemployment or unemployment (English: unemployment) is the term for people who do
not work at all, are looking for work, work less than two days a week, or someone who is trying
to get a decent job. Unemployment is generally caused by the number of workforce or job seekers
is not proportional to the number of jobs that are able to absorb it. Unemployment is often a
problem in the economy, because with unemployment, people's productivity and income will
decrease so that it can cause poverty and other social problems. Job search (English: job search) is
the process of matching workers to suitable jobs.
In economics, inflation is a process of increasing prices in general and continuously related
to market mechanisms that can be caused by various factors, including, increased public
consumption, excess liquidity in the market which triggers consumption or even speculation to
include also due to the inability of distribution of goods. [1] In other words, inflation is also a
continuous process of decreasing the value of a currency. Inflation is the process of an event, not
the price level. That is, the price level that is considered high is not necessarily indicative of
inflation. Inflation is an indicator to see the rate of change, and is considered to occur if the process
of price increases takes place continuously and influences each other. The term inflation is also
used to mean an increase in the money supply which is sometimes seen as the cause of rising
prices. There are many ways to measure inflation, the two most commonly used are the CPI and
GDP Deflator.
Economic growth is the process of continuously changing a country's economic condition
towards a better condition for a certain period. Economic growth can also be interpreted as a
process of increasing the production capacity of an economy which is realized in the form of an
increase in national income. The existence of economic growth is an indication of the success of
economic development in people's lives. Economic growth shows the growth in the production of
goods and services in the area of the economy within a certain time interval. The higher the level
of economic growth, the faster the process of increasing regional output so that the prospects for
regional development are getting better. Knowing the sources of economic growth can determine
the priority development sector. According to Todaro and Smith (2004) there are three main factors
or components that influence economic growth, namely capital accumulation (capital
accumulation), population growth (grawth in population), and technological progress
(technological progress).

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BIBLIOGRAPHY

https://id.wikipedia.org/wiki/Peng unemployment
https://id.wikipedia.org/wiki/Inflasi
https://id.wikipedia.org/wiki/Pertangunan_ekonomi

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