Module 2: Unemployment Flashcards
definition of unemployment rate?
% of +16 noninstitutionalized civilians who want a job and don’t have one
formula for unempl. rate?
l
unemployed / labor force
who is part of the labor force?
+16s noninstitutionalized with or without job, excluding students, retirees, homemakers and discouraged
main problem of unemployment?
encouraged/discouraged phenomen (people stop looking for jobs after a while suddenly not considered unemployed, and also when better times this people start looking again and count as employed)
what determines job creation?
G&S produced, which is affected by prices and gov’t policies
what determines labor force growth?
population growth, participation rate, % of noninstitutionalized civilians
what is frictional unemployment?
is people between jobs and out of school
what is structural unemployment?
when tech makes people’s skills obsolete or the nature/laws of production change (miners, etc)
what is cyclical unempl.?
when unempl. is above NRU
4 business cycles?
-expansionary
-peak
-contractionary
-trough (depression)
what is full-employment GDP?
when unempl. is at NRU = economy at full capacity.
-unempl. below NRU leads to inflation
-unempl. above NRU leads to recession
what is the output gap? Also called ___
is the difference between potential and current unemployment (cost of unempl. to society without suffering accounted)
what is Okun’s law?
Is a rule of thumb: unempl. rate up by 1% = output gap of 2%
Because during recessions firms don’t lay off to avoid training new people
what is hysteresis?
is a vicious cycle whre historical unempl. affects its NRU. Also a possible explanation for rising NRU during recessions (policies can do that by extending unempl. benefits)
how is NRU measured?
sum of frictional, structural and institutionally induced unemployment
participation rate formula?
labor force / adult population
