Unit 2: Unemployment

Related image
Unemployment: failure to use available resources, particularly labor, to produce desired goods and services. 

Population: the number of people in a country

Labor Force: number of people in a country that are classified as employed or unemployed

Employed: people who are 16 years of age or older who have a job; must work at least hour every two weeks; does not matter if it is full time or part-time

Unemployed: people who are 16 years of age or older who do not have a job but they have actively searched for a job in the last two weeks

Not in the Labor Force: 

  • kids
  • full-time students
  • retirees
  • the disabled
  • the mentally institutionalized 
  • the incarcerated
  • the military 
  • homemakers
  • discouraged workers
How to Calculate Unemployment Rate: 
  • (number of unemployed/number of unemployed + number of employed) x 100
4 Types of Unemployment
  • Frictional Unemployment: people are temporarily unemployed or in between jobs; these individuals are qualified workers with transferable skills (people that have a high school or college degree, could be looking for a better opportunity) 
  • Seasonal Unemployment: where one works a certain time of the year (lifeguards, construction workers, school bus drivers, mall santas, easter bunny)
  • Structural Unemployment: changes in the structure of the labor force make some skills obsolete; workers do not have transferable skills 
  • Cyclical Unemployment: unemployment that results from economic downturns in the economy; as demand for goods and services falls, demand for labor falls and workers are laid off (recession)
Creative Destruction: as new jobs are created, old jobs are lost  

Full Employment: (4-5 % Unemployment Rate) 
  • there is no cyclical unemployment 
Natural Rate of Unemployment (NRU): frictional + structural unemployment = NRU

Okun's Law: for every one percent by which the actual unemployment rate exceeds the natural rate of unemployment, real GDP will fall by 2% 

Rule of 70: the number of years it takes for GDP to double 
  • ex: if the annual inflation rate is 2 %, how many years will it take for GDP to double? (70/2 = 35 years).

Comments

Post a Comment

Popular posts from this blog

Unit 3: Consumption and Saving

Image
Disposable Income: income after taxes or net income With disposable income, households can either - Consume (spend money on goods and services) - Save (not spend money on goods and services) Consumption Household spending The ability to consume is constrained by (the amount of disposable income, the propensity to save)  Do households consume of DI = 0? Yes. (autonomous consumption, dissaving) Saving Household is not spending The ability to save is constrained by (the amount of disposable income, the propensity to consume) Do households save DI = 0? No.  Formulas:  APC = Average Propensity to Consume, APS = Average Propensity to Save MPC = Marginal Propensity to Consume APC + APS = 1 1 - APC = APS 1 - APS = APC APC > 1 = Dissaving -APS = Dissaving MPC + MPS = 1 MPC = 1 - MPS MPS = 1 - MPC  MPC = change in consumption/change in DI (% of every extra dollar earned that is spent) the fraction of any change ...
Read more

Unit 3: Aggregate Supply

Image
Aggregate Supply: The level of real GDP (GDPR)  that firms will produce at each price level (PL) Long Run v. Short Run Long Run period of time where input prices are completely flexible and adjust to changes in the price level, always vertical the level of real GDP supplied is independent of the price level the Long-Run Aggregate Supply (LRAS) marks the level of full employment in the economy (analogous to PPC)  vertical Short Run period of time where input prices are sticky and do not adjust to changes in the price level the level of real GDP supplies is directly related to the price level because input prices are sticky in the short-run, the Short-Run Aggregate Supply (SRAS) is upward sloping upward sloping  Changes in SRAS  an increase in SRAS is seen as a shift to the right a decrease is seen as a shift to the left the key to understanding shifts in SRAS is per unit cost of production per-unit production cost = tot...
Read more

Unit 1: Supply

Image
Shalom Akinwunmi AP Economics 3rd Period Supply: the quantities that producers or sellers are willing and able to produce or sell at various prices The Law of Supply: There is a direct relationship between price and quantity supply What Causes a Change in the Quantity of Supply? Δ in price What Causes a Change in Supply? Δ In the number of sellers (producers/suppliers) In the cost of production (resource prices) In technology In the weather In taxes and subsidies In expectations Total revenue formula: Price x Quantity Fixed cost: a cost that does not change no matter how much of a good is being produced Variable cost: a cost that rises and falls depending upon how much is produced Marginal cost: the cost of producing one more additional unit of a good Marginal Revenue: New total revenue - old marginal revenue Important Formulas (Q: Quantity; TC: Total Cost; TFC: Total Fixed Cost; TVC: Total Variable Cost; MC: Marginal Cost; AFC: A...
Read more