ECON Chapter 7

Total number of civilian, non institutionalized adults (aged 16-65) willing and able to work, actively looking for work but have not found a job

cost
economy
output

Non-institutionalized civilians aged 16 to 65 who either have jobs or who are looking and available for jobs; the number of employed plus the number of unemployed

the percentage of the measured labor force that is unemployed.

Lost output
Personal psychological impact

Individuals:
Under 16 and over 65
Physically and mentally Incapacitated
In institutions
Active duty military
Discouraged workers

Labor force = the employed + the unemployed

Unemployed / Labor force x 100

1/3 find work within a month
1/3 find employement within a second month
1/6 are still unemployed after six months
Average duration 15 weeks throughout the the last 15 years

IndividuLS WHO HAVE STOPPED LOOKING FOR A JOB BECAUSE THEY ARE CONVINCED THEY WILL NOT FIND A SUITABLE ONE

Those people are not working, yet they are not considered part of the labor force, so they are not counted among the unemployed

Unemployment rate would be higher if they were included

The proportion of non-institutionalized working-age individuals who are employed or seeking employment

The labor force divided by working age adults not institutionalized or active duty military

Frictional
Structural
Cyclical
Seasonal

results from the fact that workers must search for appropriate job offers
"Between jobs"
Always present in our economy

Results from a poor match of workers abilities and skills with current requirements of employers

Results from business recessions that occur when aggregate (total demand is insufficient to create full employment
Seen during recessions

Results from the seasonal patter of work in specific industries

An arbitrary level of unemployment that corresponds to "normal" friction in the labor market

The unemployment rate that is estimated to prevail in the long- run macroeconomic equilibrium
Should not reflect cyclical unemployment
When seasonal adjusted, the natural rate should include only frictional and structural

A sustained increase in the average of all prices of goods and services in an economy

A sustained decrease in the average of all prices of goods and services in an economy

The value of money for buying goods and services
Varies with prices and income

Prices expressed in today's dollars

Value expressed i purchasing power, adjusted for inflation

Representative bundle of goods and services

The point of reference for comparison of prices in other years

The cost of today’s market basket of goods expressed as a percentage of the cost of the same market basket during a base year

Cost today of market basket/ Cost of market basket in base year x 100

Consumer Price Index (CPI)
Producer Price Index (PPI)
GDP deflator
Personal Consumption Expenditure (PCE)

A statistical measure of a weighted average of prices of a specified set of goods and services purchased by wage earners in urban areas
Market basket of goods and services of typical consumer

A statistical measure of a weighted average of prices of goods and services that firms produce and sell
Used as a short-run leading indicator (before CPI)
PPIs for
Foodstuffs
Intermediate goods
Finished goods

The inflation rate that we believe will occur

Inflation at a rate that comes as a surprise

The market rate of interest expressed in today’s dollars

The nominal rate of interest minus the anticipated rate of inflation

Nominal interest rate = 10%
Expected inflation rate = 6%
Real rate = 10% – 6% = 4%

Inflation affects people differently

Creditors lose
Debtors gain

Clauses in contracts that allow for increases in specified nominal values to take account of changes in the cost of living

The cost associated with recalculating prices and printing new price lists when there is inflation

The ups and downs in business activity throughout the economy

A business fluctuation in which the pace of national economic activity is speeding up

A business fluctuation during which the pace of national economic activity is slowing down

A period of time during which the rate of growth of business activity is consistently less than its long-term trend or is negative

An extremely severe rece

Economic downturns often follow
Reduction in the average workweek
Rise in unemployment insura