Macro - Objectives Flashcards
Cyclical Unemployment
Demand-Deficient
Lack or reduced AD forces firms to fire people
Stagflation
State of an economy when it experiences high unemployment and high inflation
Caused by a fall in SRAS
Frictional Unemployment
When people are between jobs
Seasonal Unemployment
When people do jobs only required at specific times of the year e.g Christmas time
Structural Unemployment
When there is a mismatch between S+D for a particular set of skills
1. When firm moves people won’t move with it
2. Market moves on from certain products e.g advances in technology
Costs of unemployment
Loss of GDP
Loss of tax revenue
Increased cost of unemployment benefits
Loss of income for individuals
Greater income inequality
Personal costs of unemployment
Increased indebtedness, homelessness and family breakdown
Increased stress
Social costs of unemployment
Increased crime
Increased risks to health
3 major economic goals
Promote economic growth
Limit Unemployment
Keep prices stable (limit inflation)
Inflation
Rising general level of prices
Reduces purchasing power of money
Consumer Price Index
Most commonly used measurement of inflation
Causes of inflation
- Gov printing too much money (hyperinflation)
- Demand - pull inflation
- Cost - push inflation
Demand-Pull Inflation
Demand pulls up prices
Overheated economy with excessive spending but same amount of goods
Cost-push Inflation
Higher production costs increase prices
Negative supply shock increases costs of production and forces producers to increase prices
