Principles of macroeconomics 10e by case fair oster ch07

Unemployment Measuring Unemployment Components of the Unemployment Rate The Costs of Unemployment... Labor Force MillionsEmployed Millions Unemployed Millions Labor Force Participation R

Unemployment

Measuring Unemployment Components of the Unemployment Rate The Costs of Unemployment

unemployed A person 16 years old or older who is not working, is available for work, and has made specific efforts to find work during the previous 4 weeks.

Unemployment

Measuring Unemployment

labor force = employed + unemployed

population = labor force + not in labor force

Unemployment

Measuring Unemployment

employed + unemployed

labor force labor force participation rate =

b Not in the labor force.

c In the labor force but not currently employed

d In the labor force participation rate, but not in the labor force

b Not in the labor force.

c In the labor force but not currently employed

d In the labor force participation rate, but not in the labor force

Labor Force (Millions)

Employed (Millions)

Unemployed (Millions)

Labor Force Participation Rate (Percentage Points)

Unemployment

Rate (Percentage Points)

TABLE 7.2 Unemployment Rates by Demographic Group, 1982 and 2010

20+

20+

19.3 16.5

17.4 11.8

Unemployment

Components of the Unemployment Rate

Unemployment Rates for Different Demographic Groups

Components of the Unemployment Rate

Unemployment Rates in States and Regions

c A low national rate of unemployment does not mean that the entire nation is growing and producing at the same rate.

d All of the above

c A low national rate of unemployment does not mean that the entire nation is growing and producing at the same rate.

d All of the above

Components of the Unemployment Rate

Discouraged-Worker Effects

As women began joining the

labor force in greater numbers

in the 1970s and 1980s, their

wages relative to men’s wages

actually fell

Most economists attribute this

decline to the fact that less

experienced women were

entering the labor force,

pointing out the importance of

correcting for factors such as

experience and education when we analyze labor markets

If you are interested in learning more about the economic history of American

women, read the book Understanding the Gender Gap: An Economic History

of American Women by Harvard University economist Claudia Goldin.

E C O N O M I C S I N P R A C T I C E

A Quiet Revolution: Women Join the Labor Force

TABLE 7.4 Average Duration of Unemployment, 1970–2009

Components of the Unemployment Rate

The Duration of Unemployment

The Costs of Unemployment

Some Unemployment Is Inevitable

frictional unemployment The portion of unemployment that

is due to the normal turnover in the labor market; used to denote short-run job/skill matching problems

structural unemployment The portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries

Unemployment

The Costs of Unemployment

Frictional, Structural, and Cyclical Unemployment

natural rate of unemployment The unemployment rate that occurs as a normal part of the functioning of the economy

Sometimes taken as the sum of frictional unemployment rate and structural unemployment rate

At the bottom were the poor and the fully unemployed, about

25 percent of the labor force Even those who kept their jobs found themselves working part-time

Many people lost all or part of their savings as the stock market crashed and thousands of banks failed

Unemployment

The Costs of Unemployment

Social Consequences

by the typical urban consumer

Inflation

The Consumer Price Index

a Recreation, medical care, and education.

b Food and beverage, apparel, and other goods and services

c Housing, transportation, and food and beverages

d None of the above The typical consumer spends about the same amount of money on each of the categories listed in the choices above

a Recreation, medical care, and education.

b Food and beverage, apparel, and other goods and services

c Housing, transportation, and food and beverages.

d None of the above The typical consumer spends about the same amount of money on each of the categories listed in the choices above

in CPI CPI

Percentage Change

in CPI CPI

Percentage Change

During inflations, most prices—including input prices like wages—tend

to rise together, and input prices determine both the incomes of workers and the incomes of owners of capital and land

So inflation by itself does not necessarily reduce ones purchasing power

Inflation

The Costs of Inflation

In the last few years many

state governments in the

United States have begun to

see the costs associated with

retiring state workers

escalate as the number of

retirees has grown

For many of these

public-sector retirees, pensions

have been tied to the cost of

living

E C O N O M I C S I N P R A C T I C E

The Politics of Cost-of-Living Adjustments

No Cost-of-Living Increase for State Retirees in July

The Baltimore Sun

real interest rate The difference between the interest rate

on a loan and the inflation rate

Inflation

The Costs of Inflation

Inflation May Change the Distribution of Income

The interest rate stated in a loan contract is:

a The real rate of interest

b The nominal rate of interest minus the rate of inflation

c The real rate of interest plus the rate of inflation

d The same as the rate of inflation

The interest rate stated in a loan contract is:

a The real rate of interest

b The nominal rate of interest minus the rate of inflation

c The real rate of interest plus the rate of inflation.

d The same as the rate of inflation

Economists have debated the seriousness of the costs of inflation for decades.

No matter what the real economic cost of inflation, people do not like it

Inflation

The Costs of Inflation

Administrative Costs and Inefficiencies

Public Enemy Number One?

output growth The growth rate of the output of the entire economy

per-capita output growth The growth rate of output per person in the economy

productivity growth The growth rate of output per worker

Long-Run Growth

Which of the following is part of an ideal economy?

a Rapid growth of output per worker

b Low unemployment

c Low inflation

d All of the above

Which of the following is part of an ideal economy?

a Rapid growth of output per worker

b Low unemployment

c Low inflation

d All of the above.

The first chapter of this part introduced the field; the second chapter discussed

the measurement of national product and national income; and this chapter

discussed unemployment, inflation, and long-run growth

We are now ready to begin the analysis of how the macroeconomy works

labor force participation rate

natural rate of unemployment

not in the labor force

output growth

per-capita output growth

producer price indexes (PPIs)productivity growth

real interest ratestructural unemploymentunemployed

unemployment rate

1 labor force = employed + unemployed

2 population = labor force + not in labor force

3

4

unemployed employed

unemployed rate

rateion participatforce

R E V I E W T E R M S A N D C O N C E P T S