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## Macroeconomics Notes Week 4

by: Kate Notetaker

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# Macroeconomics Notes Week 4 Econ 1012

Marketplace > George Washington University > Economcs > Econ 1012 > Macroeconomics Notes Week 4
Kate Notetaker
GWU

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Notes for February 2 and 4, 2016.
COURSE
Macroeconomics
PROF.
Dr. John Volpe
TYPE
Class Notes
PAGES
2
WORDS
KARMA
25 ?

## Popular in Economcs

This 2 page Class Notes was uploaded by Kate Notetaker on Wednesday February 3, 2016. The Class Notes belongs to Econ 1012 at George Washington University taught by Dr. John Volpe in Spring 2016. Since its upload, it has received 13 views. For similar materials see Macroeconomics in Economcs at George Washington University.

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Date Created: 02/03/16
Macroeconomics Week 4  Measuring Unemployment o Labor Force  The sum of employed and unemployed workers in the economy o Unemployment rate  the percentage of the labor force that is unemployed  (Number of unemployed/Labor force) x 100 = unemployment rate  Discouraged workers o People available for work, but not looking for a job because they believe no jobs are available for them o Haven’t looked for a job for four weeks  Labor Force Participation Rate o 16 yrs of age or older considered available for work  denominator o Number of people looking and people actually working (unemployed + employed)  nominator o Rate going down in US  Number currently is low  Getting lower because the baby boomers are retiring  Also getting lower because younger people are not working as much as they used to be  More people are in school  Some young people do not have the skills/education/experience o How to get the rate up:  Induce people to get back into the workforce by making them healthier  Small increase in number of people that work  Increase birth rates  Family sizes are getting smaller and smaller  Import people  Number of illegal immigrants is presumably 11 million people o Number has stayed the same for 6-7 years  Developing countries with large population sizes and not enough employment o They go to countries where they can find this employment  Frictional unemployment  short term unemployment that arises from the process of matching workers with jobs o Occurs mostly because of job search or being between jobs o Also occurs because of seasonal unemployment o Some frictional unemployment actually increases economic efficiency by allowing for better job matches  Structural Unemployment  unemployment that arises from a persistent mismatch between skills and attributes of workers and requirements of jobs o Associated with longer unemployment spells  Cyclical unemployment  caused by a business cycle recession o When all unemployment is due to frictional and structural factors  full employment o There will always be some unemployment in the economy  Some government policies probably increase unemployment o Unemployment insurance o Minimum wage laws  Okun’s Law o If you reduce the unemployment rate by 1%, you can get a 2 and a half % increase in the nations gross domestic product (GDP).  Inflation o Everyone is impacted by inflation o Inflation is a steady persistent increase in the general level of prices  Deflation is the opposite o Disinflation is when the inflation rate falls  Efficiency wages o An above-market wage that a firm pays to increase workers’ productivity o The idea that paying workers a relatively high wage will make them motivated to perform well in order to keep their job o These wages are probably another reason why unemployment exists  Even when cyclical unemployment is zero  Consumer price index  measure of the average change over time in prices of typical urban family of four pays for goods or services o (Expenditures in the current year/Expenditures in the base year) x 100  Nominal interest rate o Stated interest rate on a loan  Real interest rate o Nominal interest rate minus the inflation rate 

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