Unemployment increasing employment. Increase in employment Increases the

Unemployment is has huge importance among the macroeconomic
problems. . If
unemployment is experienced in any country, it will not only affect the
economic indicators of this country, but will also harm the social standards 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 reached to its highest level 8.64 percent in 2003. Afterwards, the unemployment
rate reaches to 5.34 percent in 2010

Apart from unemployment; inflation is another macroeconomic
issue that damages both economic and social indicators in any country. Pakistan
economy has also come with this big 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 later 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 inverse relationship
between inflation and unemployment in the long run. After the relationship
between inflation and unemployment; another relationship has got great name in
the studies of macroeconomics and that is the relationship between economic
growth and unemployment. 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 the
different countries for different periods respectively. Based on this argument;
this study is aimed 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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