Week 3 Notes
Week 3 Notes Econ 253-101
Popular in Principles of Macroeconomics
Popular in Economcs
This 2 page Class Notes was uploaded by Kayla Notetaker on Friday September 11, 2015. The Class Notes belongs to Econ 253-101 at Marshall University taught by Dr. Yuanyuan (Catherine) Chen in Fall 2015. Since its upload, it has received 60 views. For similar materials see Principles of Macroeconomics in Economcs at Marshall University.
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Date Created: 09/11/15
Macroeconomics 253 1 Chapter 9 Unemployment and In ation The state of the economy can be described by two factors unemployment rate and in ation rate 0 Misery indeX adds in ation rate and the unemployment rate to calculate an estimate of the overall economy Different types of People without jobs include 0 Those who prefer not to work at all 0 Those who are retired cannot work due to age 0 Full time college students Does joblessness Equal Unemployment amp 0 The major difference is that jobless people have no employer and are not looking those who are unemployed are physically able and are actively looking for work 0 There are two costs associated with unemployment 0 Social cost 0 Economic cost I Cost to individual loss of income decrease in consumer spending and saving I Cost to economy loss of production economy is production inside their production possibilities frontier less than they should Labor Force the sum of all the employed and unemployed people 0 People who have a job people who are actively looking for a job 0 People NOT counted in the labor force include o Retirees Homemakers Full time college students Active military service members Patients admitted to mental hospitals unable to work due to mental illness People serving in prison OOOOOO Discouraged Workers available for work but have stopped looking because they believe there are no jobs left for them Unemployment Rate the percentage of those in the labor force that are unemployed 0 Calculated by dividing the number of unemployed by the total labor force and multiplying by 100 of Unemployed x Entire Labor Force Labor Force Participation Rate LFP rate calculates the percentage of the working age population Labor Force x 1 00 Working age Population Unemployment Population Ratio the percentage of working age population that are employed Employment x 1 00 Working age Population Macroeconomics 253 2 Different Types of Unemployment 0 There are three types of unemployment o Frictional shortterm unemployment arises from trying to match workers with jobs 39 Occurs even when wages for exible and there are enough jobs to go around 39 Occurs when 0 Workers have different skills than what is required 0 Geographic mobility is not instant 0 Information about new jobs is not reaching those who are looking I Seasonal unemployment is included under the Frictional category It is the unemployment that depends on the season or weather 0 Ex Beach resorts are in higher demand and require more employees in summer months those employees will likely be laid off during winter months 0 This is why there are two unemployment rates to be calculated here one that is seasonally adjusted and one that is not 0 Structural longterm unemployment arises from constant mismatch between a worker s skills and the requirements I Unemployment is long term mainly due to current workers needing to be retrained 0 Ex Many older generation workers became unemployed as technology drastically changed many work environments 0 Cyclical arises when businesses enter recession they lay off workers and rehire when business start to work their way out of recessions Full Employment 0 When an economy is experiencing expansion rather than recession cyclical unemployment equals 0 This is considered full employment 0 Frictional and Structural unemployment are considered the natural rate of unemployment If cyclical unemployment does NOT equal zero than the rate of unemployment is not natural Frictional Structural NR 0 Ex Cyclical Unemployment 0 Structural Unemployment 17 Frictional Rate 23 17 23 4 natural unemployment rate
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