ECON 200 Handout 4 Key Terms Flashcards
General Equilibrium (Ῡ)
The notion of an economy-wide Walrasian equilibrium in which no shortages or surpluses exist
Full-Employment Equilibrium
The theoretical concept of an economy’s output under general equilibrium where all the labor markets are presumed to clear
Frictional Unemployment
The result of new entrants joining the labor force for
reasons that are always present in a healthy, stable economy: people graduating from college or high school and now looking for work, people returning to work after exiting the labor force to care for
children or to undertake a personal adventure, people looking for work after quitting or being fired from a
previous job, etc.
Structural Unemployment
Occurs because of changes in the structure of the economy
Natural Rate of Unemployment
The unemployment that results from the combination of frictional and structural causes
E=The number of employed
U=The number of unemployed, and, therefore, the labor force (LF)=E+U
s=The natural rate of separation of the employed from their jobs (making them unemployed)
f=The natural rate at which the unemployed find jobs
Es=Uf
Human Capital
The skills of the labor force
The Effects of Compounding (from Exponential Growth)
A=Starting Money
B=Percent Growth per Year
C=Amount of Years
$A(1+B)^C
Classical Theory
One major school of thought in macroeconomics where a country’s GDP (Y) is always approaching if not already at general equilibrium (Ῡ), and, therefore, there is no practical point to considering Y not equaling general equilibrium
Classical Thought
Assumption of Classical Theory
Classical Economists
Economists who believe in the Classical Theory
Keynesian Theory
A major school of thought that agrees that Y gravitates toward general equilibrium but at such a slow rate that significant deviations of Y from Ῡ can persist for meaningful periods of time.
Keynesian Thought
Assumption of Keynesian Thought
Keynesian Economists
Economists who believe in the Keynesian Theory
