CHAPTER 12 (2014)Apunte Inglés
Vista previa del texto
ECONOMICS. CHAPTER 12
UNEMPLOYMENT AND INFLATION
EMPLOYMENT: Number of people currently employed in the economy, either full time or part time.
UNEMPLOYMENT: Number of people who are actively looking for work but aren’t currently employed.
LABOR FORCE = EMPLOYMENT + UNEMPLOYMENT Unemployment rate is a good indicator of how easy or difficult is to find a job given the current state of the economy.
Discouraged workers are nonworking people who are capable of working but have given up looking for a job given the state of the job market.
Marginally attached workers would like to be employed and have looked for a job in the recent past but are not currently looking for work Underemployment is the number of people who work part time because they cannot find full-time jobs.
GRAPHICALLY REPRESENTED… ECONOMICS. CHAPTER 12 During RECESSIONS — Unemployment raises During EXPANSIONS — Unemployment falls *Jobless recovery: Period in which real GDP rate is positive but unemployment rate is still raising.
THE NATURAL RATE OF UNEMPLOYMENT.
-Workers who spend time looking for employment are engaged in job search.
Frictional Unemployment: Unemployment due to the time workers spend in job search.
Structural Unemployment: Unemployment that results when there are more people seeking jobs in a labor market that there are jobs available at the current wage.
FACTORS THAT CAN LEAD TO A WAGE RATE > WE 1-Minimum wages 2-Labor unions 3-Efficiency wages 4-Side effects of Government Policies 5-Mismatches employers-employees.
NATURAL RATE OF UNEMPLOYMENT: Normal unemployment rate around which the actual unemployment rate fluctuates.
*Frictional unemployment + Structural unemployment = Natural Rate of Unemployment.
CYCLICAL UNEMPLOYMENT: Deviation in the actual rate of unemployment from the natural rate.
ACTUAL UNEMPLOYMENT = Natural unemployment + Cyclical unemployment Changes in the natural rate of unemployment can be caused by: 1-Changes in labor force characteristics 2-Changes in labor market institutions 3-Changes in government policies ECONOMICS. CHAPTER 12 THE INFLATION RATE.
REAL WAGE = Wage rate / Price level REAL INCOME = Income / Price level THE COSTS OF INFLATION 1.SHOE-LEATHER COSTS: Increased costs of transactions caused by inflation 2.MENU COST: Real cost of changing a listed price 3.UNIT-OF-ACCOUNT: Costs are costs arising from the way inflation makes money a less reliable asset Inflation reduces the quality of economic decisions and has important effects in the tax system.
WINNERS AND LOSERS FROM INFLATION NOMINAL INTEREST RATE: Interest rate expressed in dollar terms.
REAL INTEREST RATE = Nominal interest rate - Rate of inflation If inflation is higher than expected —> BORROWER WINS If inflation is lower than expected —> LENDER WINS Inflation = Rise in the overall price level Deflation = Fall in the overall price level DISINFLATION = Process of bringing the inflation rate down.