Chapter 5 Flashcards
Frictional Unemployment
people who left their jobs to find a better one or because of from one place to another or who just joined the workforce for the first time
Structural Unemployment
People not working because they lack skills required by available jobs (there is a mismatch)
Cyclical Unemployment
Not working because of the recession
Natural Employment
Even with Full employment, frictional and structural always exist
Labor force
employed + unemployed
Okuns law
for every increase in cyclical employment by 1%, output decreases by 2%
Underground economy
gov mistakenly count people as unemployed but they are currently working under the table illegally
discouraged workers
lazy bums who out of labor force
underemployed
doctors working at mcdonalds
Business cycles
Short term fluctuations in the level of economic activity, actual output fluctuates around the potential output
Stages of business cycle
Peak, Trough, Contraction, Recovery, Recession, Expantion
Peak
The highest point of the cycle where output reaches its max
Trough
The lowest point of a cycle where output reaches its min
Contraction
is a drop in output and employment
Recovery
is an increase in output and employment
Recession
a period during which there is a contraction
expansion
a period during which there is a recovery
Depression
prolonged recession
boom
prolonged expansion
inflation
continuous increase in the price level
deflation
continuous deflation in the price level
base year
reference year we compare our situation now relative to that year (cpi equals 100 for base)
Indexing
salaries increase every year to compensate for inflation
Shoe-leather cost
people keep their money in the bank because it gives some return rather than just having it in your pocket. so they lose time going to the bank.
