Ch.4 Unemployment/Inflation Flashcards
Structure of
Labour vs
Working-Age vs
Population
Population
= Working-Age + Non W/A
Working-Age Population
= Labour Force + Non L/A
Labour Force
= Employed+Unemployed
Working-Age Population
is people EXCLUDING
- < 15 yrs of age
- 3 Territories & Aboriginal residents
- Penal/ Mental/ Hospital residents
- Armed Forces
4 groups who are
Non Labour Force
in working-age population
- Retired
- Financially independent
- Discouraged Worker
- Chose to be (housemaker)
Definition of
1) Employed
2) Unemployed (calc.)
1.a In Labour Force
1.b Paid
2.a In Labour Force
2.b Not Paid
2.c Seeking jobs actively
. Unemployed
Unemp rate =——————–
. Labour Force
Labour Force Participation Rate =
. Labour Force
= ———————-
. Working-Age Pop.
. Emp + Unemp
= ———————-
. Working-Age Pop.
Unemployment Type
- Time matching Ppl & Jobs
- Searching for Right Job
- Result of EI benefit
- Student graduated
- Homemakers enter market
Frictional Unemployment
Unemployment Type
- Long-term Frictional Unemp
- Spinoff of new/old industries
- Retrain/Move ppl to work
- Seasonal Unemp (e.g. winter only jobs)
- Rood cause: Taste/Tech Changed
Structural Unemployment
Unemployment Type
- Occurs in Recession
Cyclical Unemployment
Natural Rate of
Unemployment =
= Full Employment
@peak of business cycle
= Frictional + Structural Unemp
Unavoidable mismatching in Labour Market
cyclical unemp = 0
3 Conditions change Canada’s
Natural Rate of
Unemployment
Changes of
1. EI Benefits
benefits ↑
2. Avg Job Search Time
affordable
3. Labour-Force Participation Rates
female
2 Conditions each
of reported
Unemp Rates
Under- / Over-Stated
Understated because
1) Part-timers = Full-timers
2) Excl. Discouraged Workers
Overstated because
1) False info of EI recipient
2) False info of underground economy
Costs of Unemployment
& calculation
G/S Produced < Potential
GDP gap =
potential GDP - actual GDP (R/N)
= 2.5 x Cyclical Unemp %
x actual GDP (R/N)
Okun’s Law
Actual Unemployment Rate =
= Cyclical + Natural
= Cyclical + Frictional + Structural
Persistent Rise in
General $ Prices
is ___
Inflation
2 Measures of Inflation
1) CPI
Explicit index
Bundle of (constant) consumer G/S for fam-of-4 prices collected/mon
for consumer incl. IMPORTs
Excl Capital & Gov exp.
2) GDP Deflator
Implicit index
Domestic G/S prod incl. goods of capital/ export/ consumer & gov srv.
No Imports
Bundle may change yearly
Stat Canada uses
