Chapter 8 Flashcards
Employment
total # of people in economy aged 15 or older working full or part time
Employment rate equation
(#of employed/ population 15 years or older)x100
Unemployment criteria (3)
- Does not currently have paid job
- Available for work and 15 years of age
- actively looking for job in past 4 weeks
unemployment
total number of available people aged 15 or older are currently not employed and are looking for work
unemployment rate
percent of the total number of people in labour force unemployed
unemployment rate equation
(#of unemployed workers/labour force)x100
what 2 things make up the Labor Force
sum of employment plus and unemployment
Labor Force participation rate
percentage of population aged 15 or older in labour force
labor force participation rate equation
(labor force/population aged 15 older)x100
Does unemployment still rise even after a recession
yes because economy doesn’t recover instantly
Pros of Unemployment rate graph
good indicator of likelihood to find a job
cons of unemployment rate graph
overstates and understates true level of unemployment
unemployment graph overstates example
normal to take time finding a job but when jobs are high, people refuse positions
unemployment graph understates examples (3)
- Discouraged worker
- marginally attached worker
- underemployed
Discouraged workers
those given up looking for work because they have little to no chance
Marginally attached worker
like to be employed, stopped looking for more then 4weeks, may be waiting for employment to begin
underemployed
people who work part-time, or do not maximize skills in current job
Job search
workers looking for employment
Unemployment graph- recession and expansion
rise during recession, fall during expansion
Jobless recovery
period where Real GDP growth rate is positive but underemployment rate is rising
Can unemployment ever reach 0%
NO
Natural Unemployment
unemployment that occurs naturally
Frictional + Structural unemployment
Actual Unemployment
natural unemployment + cyclical unemployment
Frictional Unemployment
unemployment due to time workers spend in job search
Frictional Unemployment Determinants (3)
Scarcity of Information
No jobs available
no matches/refused offers
Structural Unemployment (5)
Caused by changes in labour demand, improve technology, lack of skills, live far away, unwilling to work at wage offer
structural unemployment determinants (5)
labour unions, minimum wages, efficient wages, government policies, skill mismatches
cyclical unemployment
deviation from the natural rate due to business cycles
NAIRU?
non-accelerating inflation rate of unemployment
why is natural rate of unemployment not constant (3)
changes in characteristics of
- labor force characteristics
- labor marketing institutions
- government policies
labor force characteristics
demographic changes ex age, sex,
labor marketing institutions
unions, temp agencies, technology
government policies
employment subsidies, insurance, minimum wage
real wage
wage rate divided by price level
real income
income divided by price level
inflation rate equation
((PI year 2 - PI year 1)/PI year 1))x100
Cost of Inflation (3)
Shoe leather
Menu Cost
Unit of Account costs
Shoe Leather Costs
increased cause of transactions, money loses value so we spend
Menu Cost
real cost of changing listed price
Unit of Account costs
cost arising from the way inflation makes money a less reliable unit of measurement
Interest rate
price that a lender charges for the use of their savings/items for a year
Nominal Interest Rate and example
interest rate expressed in dollar terms ex interest on student loans
real interest rate
nominal interest rate minus rate of inflation
Indexing and example
way to correct effect of inflation purchasing power by adjusting dollar value of item to inflation rate ex income decrease, price decrease
higher than expected inflation rate is good for
borrowers and bad for lenders, because they repay loans with funds that have a lower real value than had been expected
lower than expected inflation rate is good for
lenders and bad for borrowers, borrowers repay loan with funds that have a higher real value then had been expected
Disinflation
process of bringing down inflation rate
