Class Chapt 7 Flashcards
Why unemployment is a problem?
- Lost incomes and production
- Lost human capital
Which is working-age population?
the total number of people aged 15 years and over
How does the working-age population is divided?
- People in the labour force
- People not in the labour force
who is considered unemployed?
- On temporary layoff
- Without work but searching for a job within the previous 4 weeks
- Has a new job to start within four weeks.
What are the 4 Labour Market Indicators?
- The unemployment rate
- Involuntary part-time rate
- The labour force participation rate
- The employment rate
How to calculate unemployment rate?
(Number of people unemployed ÷ labour force) *100.
In a recession, unemployment increases or decreases?
Increases
How to calculate the involuntary part-time rate is?
(Number of involuntary part-time workers ÷ Labour force) *100
How to calculate the labour force participation rate?
(Labour force ÷ Working-age population) × 100.
What is the Labour force participation rate?
is the percentage of the working-age population who are members of the labour force
What is the employment rate?
is the percentage of the working-age population who have jobs.
How to calculate the employment rate?
(Employment ÷ Working-age population) *100.
Why does the labour force participation increased a lot before 1990?
Because women participated in the labour force.
Who is not included in the unemployment rate?
1.Discouraged searchers
2.Long-term future starts
3. involuntary part-timers
How can Unemployment be classified?
- Frictional unemployment (good)
- Structural unemployment (necessary)
- Cyclical unemployment (not good)
What is frictional unemployment?
it appears by the creation and destruction of jobs, it is permanent and healthy.
How does structural unemployment happens?
With changes that require different skills needed to perform jobs.
What is full employment?
when there is no cyclical unemployment, only frictional and structural.
unemployment = Natural employment
What is potential GDP
is the quantity of real GDP produced at full employment.
what is the output gap?
Real GDP minus potential GDP
Why is unpredictable inflation or deflation bad?
-Redistributes income and wealth
-Lowers real GDP and employment
-Diverts resources from production
What does CPI stands for?
Consumer Price Index
What is the Consumer Price Index?
Measures the average price paid by urban consumers for certain goods and services. to know the cost of living now compared to the past.
What is the 3 largest components in the basket?
1.Shelter
2.Transportation
3.Food and beverage
How does the CPI is calculated?
Cost of basket at current-period prices ÷ Cost of basket at base-period prices) * 100 (the result minus 100)
What is the Inflation rate?
is the percentage change in the price level from one year to the next.
How does the Inflation rate is calculated?
[(CPI this year − CPI last year) ÷ CPI last year] * 100
4 reasons for the CPI bias?
-New goods bias
-Quality change bias
-Commodity substitution bias
-Outlet substitution bias
What are the alternatives for measuring prices?
-GDP deflator
-Chained price index for consumtion (CPIP)
How to get the GDP deflator?
(Nominal GDP ÷ Real GDP)* 100
The labour force is the total number of ?
A) people employed.
B) people aged 15 years and over.
C) people in the working-age population who are employed.
D) people in the working-age population who are either employed or unemployed
Give an example of cyclical unemployment
A person that has been laid off but expects to be called back in a few weeks, just as soon as the economy improves.
What happens When real GDP is above potential GDP?
there is less than normal frictional, structural, and seasonal unemployment.
A positive inflation rate means that average prices in the economy are?
Rising
The basket used to calculate the Consumer Price Index (CPI) assumes that over time consumers?
Buy the same quantities of products no matter how prices change.
Inflation formula:
(CPI now - CPI Past / CPI past) *100
