Book: The Labor Market

Question 1

What is the natural rate of unemployment

Answer 1

The rate at which wages demanded by workers are consistent with the price decisions by a firm

Question 2

What is the non-institutional civilian population

Answer 2

Number of people available for civilian employment

Question 3

What does economists mean by sclerosis

Answer 3

Bad markets with few transactions, like the medical term for har arteries that moves blood poorly

Question 4

What are the reasons fir unemployment

Answer 4

Layoffs, quits and new entries that mostly arise from the fluctuating levels of demand among firms

Question 5

What is the duration if unemployment

Answer 5

The time people stay unemployed either because they get a new one or stop looking

Question 6

Why might the focus meatly on the unemployed be misguided

Answer 6

Because a large amount of those outside of the labor force are discouraged workers that would take a job if given to them

Question 7

How can one get a better overview of workers available

Answer 7

By looking at the employment rate instead of the unemployment rate

Question 8

Is the unemployment rate and the proportion of unemployed workers finding a job related

Answer 8

Yes, the graphs are inverse, the higher the rate the fewer find jobs

Question 9

How are workers worse of during high unemployment

Answer 9

They face higher risk of layoffs and if they become unemployed it takes more time ti get employed

Question 10

What is collective bargening

Answer 10

Wage negotiation between labor unions and employers

Question 11

What is the reservation wage

Answer 11

The wage at which it is preferred to work rather than being unemployed

Question 12

What affects a workers bargaining power

Answer 12

How costly it is fir the firm to find a replacement and how costly it is for the employee to find new employment, the labor market conditions

Question 13

What are efficiency wage theiries

Answer 13

The seaming correlation between wages and productivity, that workers work harder and better for higher wages and that decreased turnover will allow for a greater focus on the core business a greater talent retention

Question 14

How does unemployment affect wages

Answer 14

High unemployment lowers wages and low unemployment raises wages

Question 15

What does this function mean
W=P(e)*F(u,z)
(-,+)

Answer 15

That wages are a the expected price level times a function of the unemployment rate that lowers the wage when higher and a catchall variable z that heightens it

Question 16

Why does the expected price level affect nominal wages

Answer 16

Because people and firms care about real wages, workers care about the goods they can buy with their wage and firms care about how many goods the work costs and because wages are payed way after they are set

Question 17

Give some examples of variables that may affect bargaining power of employees

Answer 17

Unemployment insurance, unions and employment protection

Question 18

What is the production function

Answer 18

Y=AN
It states that production equals labor productivity aka output per worker times employment

Question 19

What dies this function mean
P = (1+m)*W

Answer 19

That the price is the cost of production plus markup

Question 20

What is the relationship between prices and wages

Answer 20

W/P = 1/(1+m)
An increase in markup decreases the real wages as it increases the prices in relation to wages

Question 21

What does equilibrium in the labor market nececitate

Answer 21

That the real wages by price setting equals the real wages by wage setting

F(u,z)=1/(1+m)

Question 22

What is the natural rate if unemployment

Answer 22

The unemployment rate required by the labor market equalibrium

Question 23

What affects the natural rate of unemployment

Answer 23

The markup that the firms may create and the factors of z that increases the bargaining power if employees, higher markup will increase unemployment and increased z will also increase it

Question 24

What determines output in the medium run

Answer 24

Natural output which is determined by equilibrium in the labor market

Question 25

Why not simply use a labor supply demand graph

Answer 25

Because people are rarely willingly unemployed but at the prices that companies set they cannot survive on any wage so at higher wages people will not simply match demand in their willingness to work

Question 26

This is a dumb card

Answer 26

Yea