Chapter 6 Macro
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This 5 page Class Notes was uploaded by Jessica D'Aniello on Thursday October 15, 2015. The Class Notes belongs to Econ 105 at Pace University taught by Prof Weinstock in Fall 2015. Since its upload, it has received 10 views. For similar materials see Macroeconomics 105 in Economcs at Pace University.
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Date Created: 10/15/15
Chapter 6 Unemployment and In ation individuals who do not currently have a job but are actively the total number of workers both the employed and the unemployed Labor force employed unemployed the percentage of the labor force that is employed Unemployment rate unemployedlabor force x 100 If the unemployment rate is 5 does that mean that 5 of people don t have a job False because it s only the 5 who are unemployed AND looking for a job the percentage of the population over 16 years of age that is in the labor force Labor force participation rate labor force population 16 years and older x 100 if you become unemployed for too long there s a danger that you can get cut off People can t get back into the groove of working overtime Do problems in the public schools in this country create more structural frictional or cyclical unemployment Shortterm basis26 weeks 26 weeks or longer is long term unemployment Why is y equal to gap Percentage change How is unemployment de ned and measure Employed 142034000 Unemployed 12673000 Unemployed divided by employed One more formula BUSINESS CYCLES OF THE ECONOMY other countries get the bene t of there hard work and labor ex countries with high unemployment rate who cant get a job leave the country to work Examining Unemployment Labor force participation by women In 1948 the labor force participation rate for women 20 years and older workers who left the labor force because they could not nd jobs Categories of unemployment the component of employment attributed to seasonal factors unemployment that occurs during uctuations in real GDP a normal course of business cycle productivity in any country unemployment that occurs with the normal workings of the economy such as workings of the economy such as workers taking time to search for suitable jobs and rms taking time to search for quali ed employees unemployment that occurs when there is a mismatch of skills and jobs what you can actually do in the work place how you act and your ethic Interaction skills no jobs in NewJersey look for jobs elsewhere The natural rate of unemployment the level of unemployment at which there is no cyclical unemployment It consists of only frictional and structural unemployment the level of unemployment that occurs when the unemployment rate is at the natural rate a price index that measures the cost of a xed basket of goods chosen to represent the consumption pattern of a typical consumer The CPI index for a given year say year K is de ned as CPI in year K cost of basket in year K cost of basket in base year x 100 What is in ation how much you have after taxes The change in the price of ex ice cream and they weight it on the average American income so if rent goes up 5 and ice cream goes up 5 they are going to spend the money on rent Take basket of goods and services like 400 and divide by the base year of goods and services and times by 100 much like real and nominal gdp de ator Changes depending on where you live PCE personal consumption expenditure index the federal reserves preferred measure of in ation they still use the CPI though and the GDP de ator and the PPI producers price indexfuel cost of paper etc the percentage increase change in the price level average level of all prices in the economy Orange juice prices going up is not in ation because in ation is the change of the average price not the actual price Total Everything Core everything minus food and oil natural gas diesel energy prices Automatic increases in wages or other payments that are tied to the CPI CPI plus 3 so you get a ve percent rise Cell phones were introduced in 1983 but included in the CPI until 1998 when the in ation rate is negative prices are falling make your money worth more a lot of in ation in ation rate goes double digit 1015 percent is bad when in ation slows down above 0 Our in ation is 310 of 1 Our core in ation is 14 Why is our in ation so low Oil has fallen more than 50 they have dropped because fracking because quotglobal warmingquot and also natural resources are very expensive and limited and the US dollar is very strong which mean when we buy imports we buy more of it cause its cheaper so we have a lot of goods We care that in ation is running low because it could become de ation de ation is bad because there is not enough spending that s why prices are falling and companies make much less pro ts so they re people which raises the unemployment rate And absolute poverty People with jobs will complain that there wages never go up in ation that is anticipated in ation that is not expected
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