Chapter 9 - UNEMPLOYMENT AND ITS NATURAL RATE Flashcards
What is sectoral shifts?
Changes in the composition of demand among industries or regions.
What is frictional unemployment?
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills.
What is collective bargaining?
The process by which unions and firms agree on the terms of employment.
What is efficiency wages?
Above-equilibrium wages paid by firms to increase worker productivity.
What is natural rate of unemployment and what are some explanations to the natural rate?
The amount of unemployment that the economy normally experiences. Is not desirable but it will be here all the time.
Explanations:
* Job Search
* Minimum-wage Laws
* Unions
* Efficiency wages
What is Cyclical unemployment?
The year-to-year fluctuations in unemployment around its natural rate, and it is closely associated with the short-run ups and downs of economy activity. Think of Covid-19.
When is a person unemployed?
A person is unemployed if he/she is on temporary layoff or is looking for a job.
How is labour force calculated?
LF = Number of Employed + Number of unemployed
How is the unemployment rate calculated?
U = Number of unemployed/LF
How is force participation rate calculated?
LFPR = LF/Adult population = LF /(Labour force + not in labour force)
(the percentage of the adult population that is in the labour force).
Why can unemployment rate difficult to interpret?
- Unemployed people who are not trying hard to find a job
- People calling themselves unemployed in order to receive unemployment insurance
- People who are officially unemployed bur are working “under the table” (svartjobb)
What is Employment Insurance? What problem can occur with the EI?
Employment Insurance (EI) is a government program that partially protects workers’ incomes when they become unemployed.
EI may reduce the hardship of unemployment, but the design of the program influences workers’ behavior in ways that will increase the unemployment rate. People react on incentive, if you get EI instead of work, they will do that.
What are the reasons for explaining unemployment in the long run?
Frictional unemployment
Minimum-wage levels
Unions
Efficiency wages
The population of Ectenia is 100 people: 40 work full-time, 20 work half-time but would prefer to work full-time, 10 are looking for a job, 10 would like to work but are so discouraged they have given up looking, 10 are not interested in working because they are full-time students, and 10 are retired. What is the size of Ectenia’s labour force?
70
Which one of the following would occur if Employment Insurance benefits were so generous that laid-off workers would be paid 95 percent of their regular salary?
Measured unemployment would probably overstate true unemployment.
