MACRO Chap 9: unemployment and Inflation – Flashcards

the sum of employed and unemployed workers in the economy

the % of the labor force thats unemployed

aka the household survey

-worked 1+ hours in reference week

not currently at work but is available for work and has actively looked for work during the previous month

if neither employed or unemployed

ppl who are available for work but haven't looked for a job during the previous 4 weeks bc they believe no jobs are available for them

(# unemployed/labor force)x100

the % of the working age population in the labor force (labor force/working-age pop)x100

-distinguishing between ppl who are unemployed and not in the labor force requires judgement -only measures employment, not intensity of employment (full time?, part?)

-ppl might lie about actively looking for work -may claim not to be working to avoid taxes or keep criminal activity unnoticed

-participation rate of adult men has declined.. -but women rates have increased, making the overall rate higher than it was then

-men have been going to school earlier and retiring earlier than before -increases in social security disability insurance availability have allowed ppl w disabilities to stop werk

1. frictional 2. structural 3. cyclical

-short term -arises from the process of matching -occurs mostly bc of job search: entering or re-entering the labor force, or -between jobs -seasonal unemployment

-arises from s persistent mismatch between the skills and attributes of workers & the requirements of the jobs -associated w longer unemployment spells -workers who are structurally unemployed may require retaining in order to get MODERN jobs

-unemployment causes by a business cycle recession

frictional + structural when all unemployment is due to frictional and structural factors; there will always be unemployment in the economy -somewhere between 5&6 %

natural rate of unemployment + Cyclical rate

orgs of workers that bargains employers for higher wages and better working conditions -not significant cause of unemployment

an above-market wage that a firm pays to increase workers productivity

the % increase in the price level from one year to the next

a measure of the average change over time in the prices a typical urban fan of 4 pays for goods and services they purchase -aka cost of living index

(spendings of current year/ spendings of base yr)x100

the percentage change in the CPI from previous year to now

generate "fair" increases in wages for workers and govt benefits

-substitution bias -increase in quality bias -new product bias -outlet bias

an average of the prices received by producers of goods n services at all stages of the production process Value in 1999 in dolars x(CPI in 2012/CPI in 1999) = Value in 2012

va;lies like wages in current year dollars

adjusted for inflatopn

the stated interest rate on a loan... but that much might not be worth the same amount in years

adjusted for inflation =the nominal interest rate minus the inflation rate -if originally your nominal interest rate was 6% and prices rose by 2%, then your real interest rate is 4%

-some ppls wages might not go up w inflation -nominal assets like cash decrease in value (if you hold most of your wealth in cash then inflation will decrease in real wealth for you)

-ppl & firms have increased real costs of holding cash -firms have menu costs -investors are taxed on nominal returns rather than real returns, this can increase the tax due

-ppl make it hard to make good borrowing and lending decisions -banks may lend $ at a low rate and then the real interest rate may be zero or negative

the real interest rate

-the natural rate of unemployment prevails -the unemployment rate is grater than zero -all remaining unemployment is either frictional or structural

Producer price index