Econ 10

People of working age who are actively looking for a job but who are not employed

(# of unemployed/labor force)x100

changes in demand for particular types of labor skills, changes in the geographical location of industries and therefore jobs, and labour market rigidities

occurs when workers are between jobs

occurs when demand for labor in certain industries change on a seasonal basis because of variations in need

occurs during the downturns of the business cycle, when the economy is in a delationary or recessionary gap

unemployment caused a downturn in the business cycle that arised form declining or low aggregate demand (AD)

a sustained increase in the general price level

a sustained decrease in the general price level

a decrease in the rate of inflation

a measure of the cost of living for the typical household, and compares the value of a basket of goods and services in one year with the value of the same basket in a base year

an excess of aggregate demand over aggregate supply at the full employment level of output, and is cause by an increase in aggregate demand. It is shown in the AD-AS model as a rightward shift in the AD curve.

a fall in aggreagte supply, in turn resukting from increases in wages or prices of other inputs, shown in the AD-AS model as leftward shifts of the AS curve

consumers postpone spending (usually when they see falling prices as they expect that prices will continue to fall)

a cruve that represents the relationship between unemployment and inflation

there is a negative relationship between the rate of inflation and the unemplyment rate, suggesting that in the short run policy-makers can choose between the competing alternatives of low inflation or low unemployment by using policies that affect aggreagte demand

vertical at the natural rate of unemployment, indicating that unemployment is independant of the rate of inflation, and that policy-makers do not have a choice between the two competing alternatives

-doesn't include people working in the underground economy
-discouraged workers not included
-no distinction between part-time and full-time (both measured as full-time)
-no distinction in the type of work done (underemployment - a highly trained working working as a waiter)
-doesn't include people on retraining programs who lost their job
-doesn't include people who retire early, although they'd rather be working

-loss of real output (rGDP)
-loss of income for unemployed workers
-loss of tax revenue for the gov't
-cost to the gov't of unemployment benefits
-cost to the gov't of dealing with social problems (resulting from unemployment)
-larger budget deficit or smaller budget surplus (see note if you don't understand)
-more unequal distribution of income
-unemployed people may have difficulties finding work in the future

factors preventing the forces of supply and demand from operating in the labor market. They include:
-minimum wage legistaltion
-labor union activites
-employment protection laws
-generous employment benefits

equal to the sum of structural, frictional, and season unemployment. When an economy has 'full employment', it actually has unemployment equal to the sum of those 3 types of unemployment

GOOD:
-borrowers (if someone stupid lends you money at an interest rate less than inflation, the money you pay them back after a year is worth less than the money they lent you)
-payers of fixed income or wages (they don't increase the wages or income, so the real value of their payments decreases)
-payers of incomes or wages that increase less rapidly than the rate of inflation (the real value of their payments decreases)

direct impacts:
-people who receive fixed income or wages (their purchasing power decreases)
-people who receive income or wages that increase less rapidly than the rate of inflation (their purchasing power will overall decrease)
-holders of cash (value/purchasing power of their cash falls)
-savers (no one gives interest rates that are equal to or greater than inflation rates, so the value/purchasing power of their savings falls)
-lenders (if they charge interest less than the inflation rate - this is super unrealistic, which would be a good point of analysis)
macro impacts:
-uncertainty (if people can't predict inflation, firms become more cautious about making future plans, which decreases investment, which decreases GDP)
-saving (inflation lowers the incentive to save -> increases the circular flow in some cases)
-international (export) competitiveness (when inflation occurs, the prices for foreign buyers increase, and foreign goods may become cheaper, causing exports to decrease and imports to increase -> decreasing GDP)
-social and personal costs that are unequally (people on low incomes are more seriously affected by high rates of inflation than people on higher incomes.