Chapter 15 Flashcards
What are the 3 categories of working peoples?
Employed(working full time or part time at a paid job)
Unemployed(not doing paid work and actively searching for job or temporarily laid off, about to start a new job)
Not in the Labour Force(does not fit in either previous category, ie: full time student, homemaker, or retiree)
What is the labour force equation?
Labour force= employed+ unemployed
What is the unemployment rate?
Percentage of people in the labour force who are unemployed
Equation: (Unemployed/labour force) times 100
What is the labour force participation rate?
Percentage of working age population in the labour force(employed or unemployed)
Equation: (Labour force/ Working Age population) times 100
Who does the unemployment rate miss?
Involuntary part time workers (want to be full time but only part time)
Discouraged workers(want to work but have given up on actively searching for jobs)
What is the labour underutilization rate?
Unemployment rate including unemployed, involuntary part time workers, and discouraged workers
What is frictional unemployment?
It is due to normal labour turnover and job search, healthy part of a changing economy, not a problem
What is structural unemployment?
Caused by tech changes or international competition making workers skills less important, mismatch between the skills workers hav and there skills the new job requires, healthy part of changing economy, people need retraining
What is a Seasonal unemployment?
It is due to seasonal changes in weather, it is not a problem
What is a Cyclical unemployment?
It is due to business cycle fluctuations in economic activity; unhealthy part of changing economy, is a problem that needs to be fixed
What is the natural rate of unemployment?
It is the unemployment rate at full employment, which includes frictional,structural, and seasonal unemployment
-full employment is reached when there is zero percent cyclical unemployment
When unemployment equals natural rate…
Real GDP equals Potential GDP, there is full employment
When unemployment is greater than natural rate…
Real GDP is greater than potential GDP, there is a recessionary output gap, and cyclical unemployment
When unemployment is less than the natural rate…
Real GDP is less than potential GDP, there is an inflationary out gap
What is inflation
It is a persistent rise in average prices and a fall in the value of money
-You must spend more to get the same products and services as before
-Your money is worth less
