Unemployment and Business Cycle (CH 9 - 14) Flashcards
Define Labour Force
total # of employed and unemployed adult workers
Define Participation Rate and give its formula
% of adult population that is in the labour force
PAR = (Labour Force/Adult Population) x 100
Define Unemployment Rate
% of labour force that is unemployed
UER = Unemployment/ Labour Force x 100
What 2 factors are considered when discussing unemployment rate?
underestimated due to discouraged workers i.e part - time (un) employment
overestimated due to underground economy i.e employment insurance abusers
What are the costs of unemployment?
social problems
costs of social assistance
deadweight loss
What are the types of unemployment and there definitions
frictional - results from time it takes for workers to search for jobs that best suit their tastes and skills
structural - results from mismatch between unemployment workers and available jobs
seasonal unemployment
Cyclical (deficient demand)- # of available jobs < # of unemployed
What policies are used to reduce unemployment?
Frictional: Improve info available to job seekers/employers, reduce social assistance
Structural: retraining programs, relocation assistance
Cyclical: expansionary fiscal and monetary policy
Define Business Cycle
Business cycle is continual fluctuations around long term growth trend in economy
each cycle varies in terms of:
duration (length of periods)
magnitude (crests and troughs)
diffusion (how widespread general economic conditions are)
What are the phases of the business cycle?
trough = bottom of cycle depression = widespread deep trough of long duration expansion (E) = real GDP increasing peak (P) = top of cycle boom (B) = peak where uER < natural rate recession (R) = decreasing real GDP
list the causes of change in the business cycle
changes in G stable, except during wartime
changes in G stable except for durable goods
changes in X more important the smaller the economy
changes in I volatile/postponable
Define Staple Thesis
a commodity on which the economy of a settlement concentrates much of the capital C.
What are the characteristics of a trough?
above average unemployment of labour
unused industrial capacity
low expectations
What are the characteristics of an expansion (E)?
investment machinery replaced
employment income T, means T, momentum
optimistic expectations
What are the characteristics of a peak (P)?
shortage of factors
shortage of money
expectations changing/ changed
What are the characteristics of a boom (B)?
high inflation
