Chapter 7 Flashcards
Labor force
Individuals aged 16 or older who either have jobs or who are looking and available for jobs; the number of employed plus the number of unemployed
Unemployment
The total number if adults (aged 16 years or older) who are willing and able to work and who are actively looking for work but have not found a job
Stock
The quantity if something, measured at a given point in time-for example, an inventory of goods or a bank account. Stocks are defined independently of time, although they are assessed at a point in time.
Flow
A quantity measured per unit of time; something that occurs over time, such as the income you make per week or per year or the number of individuals who are fired every month.
Job loser
An individual in the labor force whose employment was involuntarily terminated
Re entrant
An individual who used to work full time but left the labor force and has now re entered it looking for a job
Job leaver
An individual in the labor force who quits voluntarily
New entrant
An individual who has never held a full time job lasting two weeks or longer but is now seeking employment
Discouraged workers
Individuals who have stopped looking for a job because they are convinced that they will not find a suitable one
Labor force participation rate
The percentage of noninstitutionalized working-age individuals who are employed or seeking employment
Frictional unemployment
Unemployment due to the fact that workers must search for appropriate job offers. This takes time, and so they remain temporarily unemployed
Structural unemployment
Unemployment resulting from a poor match of workers’ abilities and skills with current requirements of employers
Cyclical unemployment
Unemployment resulting from business recessions that occur when aggregate (total) demand is insufficient to creat full employment
Seasonal unemployment
Unemployment resulting from the seasonal pattern of work in specific industries. It is usually due to seasonal fluctuations in demand or to changing weather conditions, rendering work difficult, if not impossible, as in the agriculture, construction, and tourist industries
Full employment
An arbitrary level of unemployment that corresponds to “normal” friction in the labor market. In 1986, a 6.5 percent rate of unemployment was considered full employment. Today, it is assumed to be around 5 percent
Natural rate of unemployment
The rate of unemployment that is estimated to prevail in long-run macroeconomic equilibrium, when all workers and employers have fully adjusted to any changes in the economy
Inflation
A sustained increase in the average of all prices of goods and services in an economy
Deflation
A sustained decrease in the average of all prices of goods and services in an economy
Purchasing power
The value of money for buying goods and services. If your money income stays the same but the price of one good that you are buying goes up, your effective purchasing power falls, and vice versa
Price index
The cost of today’s market basket of goods expressed as a percentage of the cost of the same market basket during a base year
Base year
The year that is chosen as the point of reference for comparison of prices in other years
Consumer price index (CPI)
A statistical measure of a weighted average of prices of a specified set of goods and services purchased by typical consumers in urban areas
Producer price index (PPI)
A statistical measure of a weighted average of prices of a specified set of goods and services purchased by typical consumers in urban areas
GDP deflator
A price index measuring the changes in prices of all new goods and services produced in the economy
Personal Consumption Expenditure (PCE) Index
A statistical measure of average prices that uses annually update weights based on surveys of consumer spending
Anticipated inflation
The inflation rate that we believe will occur; when it does, we are in a situation of fully anticipated inflation
Unanticipated inflation
Inflation at a rate that comes as a surprise, either higher or lower than the rate anticipated
Nominal rate of interest
The market of interest expressed in today’s dollars
Real rate of interest
The nominal rate of interest minus the anticipated rate of inflation
Cost-of-living adjustments (COLAs)
Clauses in contracts that allow for increases in specified nominal values to take account of changes in the cost of living
Reprising or menu, cost of inflation
The cost associated with recalculating prices and printing new price lists when there is inflation
Business fluctuations
The ups and does I business activity throughout the economy
Expansion
A business fluctuation in which the pace of national economic activity is speeding up
Contraction
A business fluctuation during which the pace of national economic activity is slowing down
Recession
A period of time during which the rate of growth of business activity is consistently less than its long-term trend or is negative
Depression
An extremely severe recession
Leading indicators
Events that have been found to occur before changes in business activity
