Chapter 13: Economic Challenges Unemployment 4 Types of Unemployment 4 Types of Unemployment Frictional Unemployment Frictional Unemployment People are

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Slide 2 Chapter 13: Economic Challenges Slide 3 Unemployment 4 Types of Unemployment 4 Types of Unemployment Frictional Unemployment Frictional Unemployment People are taking time to find another job People are taking time to find another job Dissatisfied with current job Dissatisfied with current job Time off for education, or personal reasons Time off for education, or personal reasons Slide 4 Unemployment 4 Types of Unemployment 4 Types of Unemployment Seasonal Unemployment Seasonal Unemployment Industry regularly shuts down during a particular season Industry regularly shuts down during a particular season Ex. Farm laborers travel across the country to work seasonal crops Ex. Farm laborers travel across the country to work seasonal crops Ex. - Tax preparation jobs Ex. - Tax preparation jobs Slide 5 Unemployment 4 Types of Unemployment 4 Types of Unemployment Structural Unemployment Structural Unemployment Structure of the economy changes, changing types of jobs available Structure of the economy changes, changing types of jobs available New technologies (farm jobs disappear, new factory jobs) New technologies (farm jobs disappear, new factory jobs) Consumer demand changes Consumer demand changes Globalization companies relocate jobs to other countries Globalization companies relocate jobs to other countries Slide 6 Unemployment 4 Types of Unemployment 4 Types of Unemployment Cyclical Unemployment Cyclical Unemployment Contraction and recession cause loss of jobs Contraction and recession cause loss of jobs Consumers have less money, demand shifts left for most products Consumers have less money, demand shifts left for most products Companies lay off workers to accommodate this decrease Companies lay off workers to accommodate this decrease Slide 7 Unemployment The Unemployment Rate The Unemployment Rate U.S. Bureau of the Census polls 50,000 families to calculate % of Americans who are looking for work, but cannot find a job U.S. Bureau of the Census polls 50,000 families to calculate % of Americans who are looking for work, but cannot find a job # of ppl. unemployed / # of civilians polled # of ppl. unemployed / # of civilians polled Slide 8 Unemployment The Unemployment Rate The Unemployment Rate An unemployment rate of 0% is impossible An unemployment rate of 0% is impossible Full Employment is when there is no cyclical unemployment Full Employment is when there is no cyclical unemployment Economies are considered healthy with an unemployment rate of 4-6% Economies are considered healthy with an unemployment rate of 4-6% Slide 9 Unemployment Problems with using Unemployment Rate as a Measure Problems with using Unemployment Rate as a Measure Does not factor in underemployment people working in jobs that are beneath their qualifications Does not factor in underemployment people working in jobs that are beneath their qualifications Ex. someone with a college degree working part time for $8.00 an hour Ex. someone with a college degree working part time for $8.00 an hour Does not factor in discouraged workers people who cant find a job, and are so frustrated that they quit looking Does not factor in discouraged workers people who cant find a job, and are so frustrated that they quit looking Slide 10 Inflation Inflation is a general increase in prices Inflation is a general increase in prices Movie Ticket in 1950 - $0.25 Movie Ticket in 1950 - $0.25 Movie Ticket in 2005 - $7.50 Movie Ticket in 2005 - $7.50 Slide 11 Inflation Inflation reduces Purchasing Power the ability of your money to purchase goods and services Inflation reduces Purchasing Power the ability of your money to purchase goods and services Say you have $3.00, and tacos cost $1.00 each Say you have $3.00, and tacos cost $1.00 each Your money is worth 3 tacos Your money is worth 3 tacos Slide 12 Inflation Inflation reduces Purchasing Power the ability of your money to purchase goods and services Inflation reduces Purchasing Power the ability of your money to purchase goods and services If you hold your $3.00 for a few years, and prices inflate to $1.50 for tacos If you hold your $3.00 for a few years, and prices inflate to $1.50 for tacos Your money is worth 2 tacos! Your money is worth 2 tacos! Slide 13 Inflation Measuring Inflation Measuring Inflation Level of Prices is calculated by using Price Indexes Level of Prices is calculated by using Price Indexes Consumer Price Index Bureau of Labor Statistics chooses a market basket of commonly bought goods, and tracks changes in price Consumer Price Index Bureau of Labor Statistics chooses a market basket of commonly bought goods, and tracks changes in price Slide 14 Inflation CPI = Current Price X 100 CPI = Current Price X 100 Base Period Price Base Period Price Slide 15 Inflation Types of Inflation Types of Inflation Creeping Inflation Creeping Inflation 1-3% per year, causes no problems 1-3% per year, causes no problems Chronic Inflation Chronic Inflation Steady increase each month, takes away incentive to save and invest Steady increase each month, takes away incentive to save and invest Hyperinflation Hyperinflation Out of control, prices could double every month Out of control, prices could double every month Leads to total economic collapse Leads to total economic collapse Slide 16 Inflation Causes of Inflation Causes of Inflation Quantity Theory Quantity Theory Having too much money in the economy causes inflation Having too much money in the economy causes inflation Money supply should be tightly regulated by the government Money supply should be tightly regulated by the government Slide 17 Inflation Causes of Inflation Causes of Inflation Demand-Pull Theory Demand-Pull Theory Demand for goods exceeds existing supplies Demand for goods exceeds existing supplies Businesses, thus, raise their prices Businesses, thus, raise their prices Slide 18 Inflation Causes of Inflation Causes of Inflation Cost-Push Theory Cost-Push Theory As costs go up for producers, they increase their prices As costs go up for producers, they increase their prices Ex. Employees get a raise, so to cover the additional cost, JC Penny raises its prices by 5% Ex. Employees get a raise, so to cover the additional cost, JC Penny raises its prices by 5% This trend is called a wage-price spiral This trend is called a wage-price spiral Slide 19 Poverty Poverty can mean different things to different people Poverty can mean different things to different people Defined by the Census Bureau as total income less than the amount needed to satisfy the familys minimum needs Defined by the Census Bureau as total income less than the amount needed to satisfy the familys minimum needs Census Bureau sets the poverty threshold income level below which family is considered impoverished Census Bureau sets the poverty threshold income level below which family is considered impoverished Slide 20 Poverty Sample Poverty Thresholds (U.S.) Sample Poverty Thresholds (U.S.) Single parent, one child = $13,020 Single parent, one child = $13,020 Two parents, two children = $19,257 Two parents, two children = $19,257 Slide 21 Poverty Poverty Rate - % of a group that falls below the poverty threshold Poverty Rate - % of a group that falls below the poverty threshold U.S. poverty rate is 12.7% (2004) U.S. poverty rate is 12.7% (2004) Poverty Rates help show factors that may contribute to poverty Poverty Rates help show factors that may contribute to poverty Slide 22 Poverty Poverty Rates of Various Population Groups (U.S.) Poverty Rates of Various Population Groups (U.S.) White = 8.6% White = 8.6% Black = 24.7% Black = 24.7% Hispanic = 21.9% Hispanic = 21.9% 2 Parent Households = 5.5% 2 Parent Households = 5.5% Single Parent (Female) Household = 31.6% Single Parent (Female) Household = 31.6% Slide 23 Poverty Causes of Poverty Causes of Poverty Lack of Education Lack of Education Median income for high school dropout = $18,144 Median income for high school dropout = $18,144 Median income for high school grad or GED = $25,360 Median income for high school grad or GED = $25,360 Median income for 4 year college grad = $42,404 Median income for 4 year college grad = $42,404 Slide 24 Poverty Causes of Poverty Causes of Poverty Location Location Higher income jobs are located in suburban areas Higher income jobs are located in suburban areas Large numbers of minorities concentrated in inner cities, with no means to commute Large numbers of minorities concentrated in inner cities, with no means to commute Slide 25 Poverty Causes of Poverty Causes of Poverty Racial/Gender Discrimination Racial/Gender Discrimination Women earn $0.75 for every dollar men make Women earn $0.75 for every dollar men make Blacks and Hispanics make $0.60 for every dollar whites make Blacks and Hispanics make $0.60 for every dollar whites make Result of education, location disparities, but also discrimination Result of education, location disparities, but also discrimination Slide 26 Poverty Causes of Poverty Causes of Poverty Economic Shifts Economic Shifts Laborers frequently lose their jobs as new technology replaces them Laborers frequently lose their jobs as new technology replaces them Without education and training, they can become left out of the new workforce Without education and training, they can become left out of the new workforce Slide 27 Poverty Causes of Poverty Causes of Poverty Shifts in Family Structure Shifts in Family Structure Divorce rate continues to rise, and single parent families are much more likely to be impoverished Divorce rate continues to rise, and single parent families are much more likely to be impoverished Slide 28 Income Distribution Income Distribution how the nations total income is distributed among the population Income Distribution how the nations total income is distributed among the population Shows gap between rich and poor Shows gap between rich and poor Slide

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