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
