Production and Employment Flashcards
1
Q
What is the production function?
A
Y = A*f(K, N)
2
Q
What is the relation between VMPn and Wage?
A
VMPn > Wage => employ more
VMPn < Wage => employ less
VMPn = Wage => optimum
3
Q
What is laborers’ income?
A
W*N = VMPn * N
4
Q
What is capitalists’ income?
A
r*K = VMPk *K
5
Q
What is frictional unemployment?
A
Short-run mismatch between potential workers and employers
6
Q
What is structural employment?
A
Long-run and chronic unemployment, arising from low education/job skills or the process of reallocation of labor from shrinking to growing industries
7
Q
What is Okun’s law?
A
A 1% rise in unemployment is likely to be accompanied by a 2% fall in real GDP growth rate
