unemployment and inflation Flashcards
labour force
sum of employed and unemployed workers in an economy
census
surveys households on recent job activities (employed or unemployed)
unemployed and discouraged workers
un.: out of work but available and looking
dis.: available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them
unemployment rate
% of the labour force that is unemployed
nb of unemployed / labour force x 100
labour-force participation rate
% of the working-age population in the labour force
labor force / working age pop x 100
employment-population ration
employment/ working age pop x 100
percentage growth
∆xt = xt - xt-1 / xt-1
long difference = ln (xt/xt-1)
problems with measuring the unemployment rate
understate unemployment (judgment and intensity of employment)
overstate unemployment (false statements)
include discouraged workers in unemployed
the higher the labour force participation…
more labour available means higher levels of gdp and gdp/capita
decline in the employment-population ratio after the 2008 recession
labour market scarring (skills deteriorating)
increased social security disability insurance receivers
affordable care act
min wage
licensing requirements
leisure over work
establishment survey/ payroll survey
sample establishments or places of employment about their employees
measures total employment in the economy
excludes self-employed + no info on unemployment
job creation and destruction
the natural and normal process of the economy
net changes: nb of people employed = total nb of jobes created - nb of jobs destroyed
frictional unemployment
short-term unemployment that arises from the process of matching workers with jobs (job search)
seasonal unemployment
structural unemployment
persistent mismatch between the skills or attributes of workers and the requirements for jobs
cyclical unemployment
caused by a business cycle recession
natural rate of unemployment
fictional and structural unemployment (full-employment rate)
government positive influence on unemployment
trade adjustment assistance (structural)
speed up the matching of jobs (frictional)
government increases unemployment
unemployment insurance (search for better jobs)
min wage laws (efficiency wages)
labour unions
inflation rate
% of increase in the price level from one period to the next
consumer price index
avg of the prices a typical urban family of four pays for goods and services they purchase
cpi problems
substitution bias (change in purchase habits)
increase in quality bias
new product bias
outlet bias
producer price index
avg prices received by producers at all stages of the production process
nominal vs real interest rate
nominal: the stated interest rate on the loan
real: corrects the nominal interest rate for the effect of inflation on purchasing power (nominal - inflation)
problems with anticipated inflation
decrease in purchasing power
increase real costs of holding cash (decrease in value)
menu costs
taxed on nominal returns rather than real returns (increase tax due)
problems with unanticipated inflation
harder to make lending and borrowing decisions
banks: the real interest rate they receive may be zero or negative