Unemployment and inflation Flashcards
What is the labour force survey?
A survey which is conducted that identifies percentage of unemployed and employed.
what is the formula for finding the unemployment rate?
unemployment rate =
=number of unemployed / labour force X100
=(answer)%
What is the formula for measuring the labour force participation rate?
labour force participation rate=
= labour force / working age population x100
=(answer)%
what is a under-employed worker?
people who work part-time but would like to work more hours
What happens when there is trends in labour force participation?
The higher the participation rate, the more labour is available and the higher level of potential GDP
What costs can unemployment bring to an economy?
- Costs to economy .restraining costs .loss of human capital . loss of gros sdomestic park - Costs to the government . unemployment benefits drain federal budget . oppotunity costs of funds are directed towards unemployment benefits . loss of tax revenue - Costs to individuals . loss of income . loss of skills . restraining costs . loss of self esteem . Social costs
What are the three types of unemployment?
- Cyclical unemployment
- Structural unemployment
- Frictional unemployment
What is Cyclical unemployment?
due to economic fluctuations
What is structural unemployment?
arrises from changes in technology and structure of economy
What frictional unemployment?
Arrises form normal labour turnover
What is seasonal unemployment
unemployment due to the lack of demand during certain times of the year.
What is full employment?
full employment occurs when all unemployment is frictional and and strucutral
is zero unemployment, employment?
NO
What does NAIRU stand for?
non-accelerating inflation rate of unemployment
How to reduce a job search?
information
networking
What is creative destruction?
process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one
how does government policy affect unemployment?
- minimum wage
- labour mark deregulation
- social security and other payments
- Trade unions
What is labour mark deregulation?
a shift from highly centralized wage and industrial relations system to a relatively deregulated system
What is the unemployment trap?
The unemployment trap is a situation when unemployment benefits discourage the unemployed to go to work
What is a efficiency wage?
a higher-than-market wage paid by a firm to increase worker productivity.
What are the benefits of the efficiency wage?
may reduce the need for work monitoring
provide motivation for more productive work
increases the labour supply
What is inflation?
A Sustained increase in the general level of prices in the economy
What is the inflation rate?
it is a percentage increase in the general price level i the economy from one year to the next.
How is inflation measured?
to measure price level the Gdp deflator is used.
Consumer price index measuring the cost of living
Producer price index tracks the price of goods and services at all stages of production
What does the consumer price index (CPI) measure?
measures changes in retail prices of a basket of goods and services representative of of consumption expenditure by typical australian households in capital cities.
What is the formula for finding inflation
inflation rate 2014
= CPI Current year - CPI Last Year / CPI Last year x100
What are nominal values?
Nominal values are not adjusted for inflation and increases in nominal value which reflects on the effect of inflation
What are real values?
Real values are adjusted for inflation which enables the comparison of quantities as if prices had not changed
what are some problems with inflation?
- income redistribution
- Bracket creep
- Menu costs
- unanticipated inflation
What is income redistribution?
means people on fixed incomes are likely to experience reduced purchasing power due to inflation
What are menu costs?
Cost of updating prices
What is bracket creep/fiscal drag
bracket creep is where higher tax rate applies to a taxpayer, as their income increases overtime.
What is Hyper-inflation?
Extremely rapid increases in the general price level
What causes hyper-inflation?
associated with political instability and is usually accompanied by severe recession and economic and political turmoil.
What causes inflation?
- production may be unable to meet demand
- upward pressure is put on prices and nominal wages
- cost push inflation
- sources of a supply shock
What is demand pull inflation?
caused by an increase in the aggregate demand for goods and services
what is aggregate demand?
quantity of goods and services demanded by households
what is cost push inflation?
arises as a result of anything causing a decrease in aggregate demand.
what are sources of supply shock?
- increases in: import prices wages indirect taxation monopoly power in product markets -natural disasters
