Labor Economics – Flashcards
Unlock all answers in this set
Unlock answersquestion
N.A.I.R.U stands for what?
answer
Non-accelerated rate of unemployment
question
NAIRU definition
answer
A measure that represents full employment and stable inflation.
question
Full employment
answer
A state in our economy where additional demand does not create jobs.
question
The NAIRU is projected by what government agency?
answer
The CBO
question
CBO NAIRU
answer
Represents the industry's standard for the unemployment with full employment
question
Unemployment
answer
The average of the jobless rates across the nation weighted against the relative size of the local workforce.
question
Unemployment < NAIRU
answer
This means that the labor market is tight.
question
What happens when labor markets are tight?
answer
Tight labor markets increases the income of all Americans regardless of class. But majority of the benefits disproportionally goes to the lower and middle class of Americans.
question
In what areas does the lower, middle, and upper class see a percentage increase in? And who gets the bigger increase?
answer
The American Working Class can expect to see a percentage increase in wages, hours and evidently income. The lower and middle class of America will see the biggest percentage increase in income that the upper class of America.
question
True or False: The increase in income that the upper class will see during tight labor markets would be so small that statistically it would be insignificant
answer
True
question
What are the three types of unemployment?
answer
1) Structural 2) Cyclical 3) Frictional
question
What is structural unemployment?
answer
Unemployment created due to the fact that the suppliers lack the skill or ability to obtain a job.
question
In a full economy structural unemployment represents what?
answer
The floor in our pursuit to full employment.
question
Can an increase in demand decrease structural employment?
answer
No
question
What are the two ways to spot structural unemployment?
answer
1) Large sectors in which suppliers with the necessary skills come in limited supply and wages are consistently going up. 2) The average work week for the existing workforce is being extended.
question
Cyclical Unemployment
answer
Unemployment created due to inadequate demand.
question
True or False: Stimulating demand will produce jobs.
answer
True
question
True or False: The demand in the labor market is strictly linked to our infrastructure.
answer
True. As demand increases so does the health of our infrastructure and vise-versa.
question
Frictional Unemployment
answer
Unemployment created due to those that are in between jobs. Unemployment created due to "job leavers". People who willingly leave their jobs without having another one lined up.
question
Age-Wage Trajectory
answer
The extent to which earnings increase with age for time to come.
question
Dynamic Cost
answer
Cost that is due to increase rates in inflation resulting in a decline in the rate of growth in our economy.
question
Static Cost
answer
Cost due to the continuos distortions in our tax code.
question
What is the target inflation rate that the Central Banks go for?
answer
2% inflation target.
question
Alan Greenspan
answer
A federal reserve president.
question
A study that was conducted during the 1960's, 70's, and 80's on seven developing countries showed what?
answer
That the average inflation rate was well above 2% and actually resulted in positive growth rates for our economy.
question
Taylor Rule
answer
A monetary policy rule that stipulates how much the central bank can change nominal interest rates in response to inflation, supply shocks, etc.
question
Can supply shocks affect the correlation between inflation and the growth rate in our economy? If so, how?
answer
Supply shocks can affect the relationship between inflation and the growth rate. Supply shocks refer to a sudden increase or decrease in the production of a good or service. A sudden drop in the production of a good or service causes prices for that good or service to up- which is inflation. This will result in a decline in the rate of growth in our economy. The reverse is true if there was a sudden increase in the supply of a good or service. Prices will decline causing our economy to sustain positive growth rates in our economy.
question
Conventional Monetary Policy
answer
When the federal reserve lowers the federal funds rate in an attempt to bring down long-term interest rates, which has a direct affect in bringing down our real interest rates.
question
Unconventional Monetary Policy
answer
When the federal reserve expands or contracts the money supply through quantitative easing or contraction.
