L3 Unemployment & L4 Price Level Flashcards
Unemployment
People who can work, wants a job but can’t find one
Unemployment Measure? Draw diagram and formulas
Labour force survey by ONS
Unemployment= unemployed/workforce
-find job 4 weeks
-wait for call
-wait to start job
Employment= employed/working age (the potential labour supply used up in the country), whether they want to work or not
Economic activity= economically active/working age
Shows status of the economy and can explain changes in labour market
Limitations of unemployment
Underemployment- part time work
Discouraged workers
Long term unemployment
Economic limitations eg. Globalization / business cycle
Long term unemployment
Very costly; tech change, learning cost, cost of time, time to learn new skill and human capital loss
Less income and production
Types of unemployment
Frictional- new graduates looking for jobs
Structural- competition with international industries
Cyclical- business cycle
Natural- cyclical is zero, age, minimum wage (could also be s and c)
Price Level, what for?
Changes in PL
Average levels of prices in the economy. Value of money
Real purchasing power vs economic variables
Rise- inflation (hyperinflation if big)
Fall- deflation
Small change is ok.
Big rise will cause GDP lower and less employment, redistribute wealth and income & divert resources from production
Measure? PL
RPI or CPI Retailer(household basket) /consumer(all expenditure) price index -basket -price survey -price index
- costs at current prices
- costs at base prices
- PL current/PL previous x 100
Alternative way: GDP Deflator
Broader measure hence slight diff
Nominal GDP/ real GDP x 100
Index numbers
Why? easy to read off of diagrams
% change relative to base yr= PL-100
Base yr- 100
Time seriesindex (%) Value yr x/base yr x 100
Inflation
% of increase in price level from one period to another
(PLcur-PLprev)/PLprev x 100
Gradient of the graph