Chapter 13 Section 1 - Unemployment What are the 4 types of
unemployment? What are the 4 types of unemployment? How are
unemployment rates determined? How are unemployment rates
determined? What is full employment a underemployment? What is full
employment a underemployment? What is a discouraged worker? What is
a discouraged worker? "It's a recession when your neighbor loses
his job; it's a depression when you lose your own. - Harry
Truman
Slide 2
Slide 3
The Labor Force Economists define the labor force as all
nonmilitary and non- institutionalized people who are employed or
unemployed. Economists consider someone employed or unemployed if
they are at least 16 and meet at least one of the following
criteria: Employed person: Did any work at all for pay during the
past week as a civilian, non- institutionalized person. Did any
work at all for pay during the past week as a civilian, non-
institutionalized person. Worked 15 or more hours per week without
pay in a family enterprise. Worked 15 or more hours per week
without pay in a family enterprise. Has a job, but did not work due
to illness, vacation, bad weather, etc. Has a job, but did not work
due to illness, vacation, bad weather, etc. Unemployed person:
Tried to find a job during the past 4 weeks, are actively available
for work. Tried to find a job during the past 4 weeks, are actively
available for work. Those waiting to be called back after lay off.
Those waiting to be called back after lay off.
Slide 4
Determining the Unemployment Rate The unemployment rate is an
important indicator of the health of the economy. The unemployment
rate is an important indicator of the health of the economy. For
this reason, the govt keeps careful track of how many people are
unemployed, and why. For this reason, the govt keeps careful track
of how many people are unemployed, and why. The unemployment rate =
percentage of the nations labor force that is unemployed. The
unemployment rate = percentage of the nations labor force that is
unemployed. 1-4 Americans rank jobs and unemployment as the most
important issue facing the nation. 1-4 Americans rank jobs and
unemployment as the most important issue facing the nation. The
current unemployment rate is 5.5% as of March 2015 The current
unemployment rate is 5.5% as of March 2015current unemployment rate
current unemployment rate Michigans unemployment rate is 5.6% as of
March 2015 Michigans unemployment rate is 5.6% as of March
2015unemployment rate unemployment rate Gallup.com Unemployment
Rises to Top Problem Gallup.com Unemployment Rises to Top Problem
Gallup.com
Slide 5
4 Types of Unemployment Frictional Unemployment Taking time to
find a job. Ex. laid-off, college graduation, change jobs, a stay
at home mom returning to workforce. Unemployment insurance, which
provides income to laid-off workers seeking jobs, may contribute
slightly to frictional unemployment. This type of unemployment is
healthy even when the economy is booming.
Slide 6
4 Types of Unemployment Structural Unemployment - Occurs when
workers' skills do not match the jobs that are available. Ex.
Online shopping replaces catalog call center jobs. 5 Causes of
Structural Unemployment 1.Development of new technology 2.Discovery
of new resources 3.Changes in consumer demand 4.Globalization
5.Lack of education
Slide 7
4 Types of Unemployment Seasonal Unemployment - Occurs when
industries slow or shut down for a season. Ex. Construction workers
during the winter. Ex. Construction workers during the winter. Also
considered a healthy form of unemployment and policymakers do not
try and prevent this kind of unemployment
Slide 8
4 Types of Unemployment Cyclical Unemployment - Unemployment
that rises during economic downturns and falls when the economy
improves. Ex. An autoworker gets laid-off during a recession when
people stop buying cars. Great Depression was most famous case of
cyclical unemployment. 25% unemployed. Franklin D. Roosevelt
proposed, and Congress passed, The Social Security Act of 1935. One
of its benefits was unemployment insurance.
Slide 9
Calculating the Unemployment rate Calculate the unemployment
rate using the following formula: For example: If the number of
people unemployed = 7.7 million and the number of people in the
civilian labor force = 148.2 million Then, 7.7 148.2 =.052.052 100
= 5.2 therefore, the unemployment rate is 5.2%
Slide 10
Full Employment Economists generally agree that 4 to 6 percent
is normal. Seasonal frictional, and structural will always exist.
Economists generally agree that 4 to 6 percent is normal. Seasonal
frictional, and structural will always exist. Full employment is
the level of employment reached when there is no cyclical
unemployment and nearly everyone who wants a job has a job. Full
employment is the level of employment reached when there is no
cyclical unemployment and nearly everyone who wants a job has a
job. Sometimes people are underemployed, that is working a job for
which they are over-qualified. Sometimes people are underemployed,
that is working a job for which they are over-qualified.
Discouraged workers are people who want a job, but have given up
looking for one. Discouraged workers are not in the labor
force.
Slide 11
Section 1 Assessment 1. Unemployment that occurs when workers
skills do not match the jobs that are available is known as (a)
frictional unemployment. (b) structural unemployment. (c) seasonal
unemployment. (d) cyclical unemployment. 2. The unemployment rate
(a) is the percentage of the labor force that is unemployed. (b) is
the number of people who are unemployed. (c) includes only
discouraged workers. (d) is the percentage of the labor force that
is underemployed.
Slide 12
Section 1 Assessment 1. Unemployment that occurs when workers
skills do not match the jobs that are available is known as (a)
frictional unemployment. (b) structural unemployment. (c) seasonal
unemployment. (d) cyclical unemployment. 2. The unemployment rate
(a) is the percentage of the labor force that is unemployed. (b) is
the number of people who are unemployed. (c) includes only
discouraged workers. (d) is the percentage of the labor force that
is underemployed.
Slide 13
Closing Questions Categorize the type of unemployment for each
example: Jim is unemployed as a result of a career change, and
moving across the country. Frictional Tina is unemployed as a
result in low demand for her services (snow plowing) during the
summer months. Seasonal Jan is unemployed as a result of a bad
economy. Cyclical Pat is unemployed as a result of a technology
change, and her job as a travel agent is no longer
sought.Structural
Slide 14
Inflation 13-2 What are the effects of rising prices? What are
the effects of rising prices? How do economists use price indexes?
How do economists use price indexes? How is the inflation rate
calculated? How is the inflation rate calculated? What are the
causes and effects of inflation? What are the causes and effects of
inflation?
Slide 15
The Effects of Rising Prices The old days when you could go to
a movie for.25 or buy a house for $15,000. As prices rise, income
usually rises as well. Inflation is a general increase in prices.
Purchasing power, the ability to purchase goods and services, is
decreased by rising prices (inflation shrinks the purchasing power)
Purchasing power, the ability to purchase goods and services, is
decreased by rising prices (inflation shrinks the purchasing power)
Price level is the relative cost of goods and services in the
entire economy at a given point in time (used to measure
inflation). Price level is the relative cost of goods and services
in the entire economy at a given point in time (used to measure
inflation).
Slide 16
To help economists measure price levels, they use a price
index. Price index is a measurement that shows how the average
price of a standard group of goods changes over time. Price Indexes
The consumer price index (CPI) is the best-known. It is computed
each month by the Bureau of Labor Statistics. The consumer price
index (CPI) is the best-known. It is computed each month by the
Bureau of Labor Statistics. The CPI is determined by measuring the
price of a standard group of goods meant to represent the typical
market basket of consumers. The CPI is determined by measuring the
price of a standard group of goods meant to represent the typical
market basket of consumers. Changes in the CPI from month to month
help economists measure the economys inflation rate. Changes in the
CPI from month to month help economists measure the economys
inflation rate. The inflation rate is the percentage change in
price level over time. The inflation rate is the percentage change
in price level over time.
Slide 17
Calculating Inflation When the inflation rate is between 1 and
3% its considered safeWhen the inflation rate is between 1 and 3%
its considered safe
Slide 18
The Quantity Theory The quantity theory states that too much
money in the economy leads to inflation. The quantity theory states
that too much money in the economy leads to inflation. Money supply
needs to be carefully monitored Money supply needs to be carefully
monitored The Cost-Push Theory According to the cost- push theory,
inflation occurs when producers raise prices in order to meet
increased costs (Ex: wage increases when unemployment is low.
Businesses raise wages to attract new workers, producers raise
prices to make up for it). This can lead to a wage- price spiral
(p.342) Causes of Inflation The Demand-Pull Theory The demand-pull
theory states that inflation occurs when demand for goods and
services exceeds existing supplies (Ex: during war).
Slide 19
Effects of Inflation High inflation is a major economic
problem, especially when inflation rates change greatly from year
to year. High inflation is a major economic problem, especially
when inflation rates change greatly from year to year. Purchasing
Power In an inflationary economy, a dollar loses value. It will not
buy the same amount of goods that it did in years past. In an
inflationary economy, a dollar loses value. It will not buy the
same amount of goods that it did in years past. Interest Rates When
a bank's interest rate matches the inflation rate, savers break
even. When a bank's interest rate is lower than the inflation rate,
savers lose money. When a bank's interest rate matches the
inflation rate, savers break even. When a bank's interest rate is
lower than the inflation rate, savers lose money.Income If wage
increases match the inflation rate, a worker's real income stays
the same. If income is fixed income, or income that does not
increase even when prices go up, the economic effects of inflation
can be harmful (retirement pension funds). If wage increases match
the inflation rate, a worker's real income stays the same. If
income is fixed income, or income that does not increase even when
prices go up, the economic effects of inflation can be harmful
(retirement pension funds).
Slide 20
Deflation The opposite of inflation is known as deflation, or a
sustained drop in price levels. Causes of Deflation: When overall
aggregate supply in the market is greater than overall aggregate
demand. Suppliers have to cut their prices in order to stimulate
sales when demand is lower than supply. Both inflation and
deflation can cause major economic problems if they get out of
control. The Fed tries to control both inflation and
deflation.
Slide 21
The Deflation Death Spiral Imagine a 2008 car was going for
$30,000. The 2009 model is expected to be $15,000 and the 2010
Model is expected to be $7,500. Imagine a 2008 car was going for
$30,000. The 2009 model is expected to be $15,000 and the 2010
Model is expected to be $7,500. As you can see the price is
dropping. As a result, what consumer in there right mind would buy
a vehicle if the next model will be cheaper than today's model? As
such, spending dries up on autos and the industry collapses. This
same thing can happen to other industries, like Housing. As you can
see the price is dropping. As a result, what consumer in there
right mind would buy a vehicle if the next model will be cheaper
than today's model? As such, spending dries up on autos and the
industry collapses. This same thing can happen to other industries,
like Housing. Wages drop as a result. People cannot pay back their
mortgages and loans when paychecks are cut in half. Widespread drop
in demand led to high unemployment.This is what occurred during the
Great Depression in 1929. Wages drop as a result. People cannot pay
back their mortgages and loans when paychecks are cut in half.
Widespread drop in demand led to high unemployment.This is what
occurred during the Great Depression in 1929.
Slide 22
USA annual real GDP from 191060, with the years of the Great
Depression (19291939) highlighted
Slide 23
Section 2 Assessment 1. Inflation is (a) the process by which
rising wages cause higher prices. (b) the price increase of a
typical group of goods. (c) a general increase in prices. (d) the
ability to purchase goods and services. 2. Too much money in the
economy is the cause of inflation according to (a) the quantity
theory. (b) the demand-pull theory. (c) the quantum theory. (d) the
cost-push theory.
Slide 24
Section 2 Assessment 1. Inflation is (a) the process by which
rising wages cause higher prices. (b) the price increase of a
typical group of goods. (c) a general increase in prices. (d) the
ability to purchase goods and services. 2. Too much money in the
economy is the cause of inflation according to (a) the quantity
theory. (b) the demand-pull theory. (c) the quantum theory. (d) the
cost-push theory.
Slide 25
Poverty 13-3 Who is poor, according to government standards?
Who is poor, according to government standards? What causes
poverty? What causes poverty? How is income distributed in the
United States? How is income distributed in the United States? What
government programs are intended to combat poverty? What government
programs are intended to combat poverty?
Slide 26
The Census Bureau collects data about how many families and
households live in poverty to see who the government considers poor
and what factors contribute to poverty. Who Is Poor? The Poverty
Threshold The poverty threshold is an income level below which
income is insufficient to support a family or household.The poverty
threshold is an income level below which income is insufficient to
support a family or household. The Poverty Rate The poverty rate is
the percentage of people in a particular group who live in
households with income below the official poverty line (15.1% in
2010).The poverty rate is the percentage of people in a particular
group who live in households with income below the official poverty
line (15.1% in 2010).
Slide 27
Causes of Poverty Lack of Education The average high School
dropout can expect to earn an annual income of $20,241, according
to the U.S. Census Bureau. Thats a full $10,386 less than the
typical high school graduate, and $36,424 less than someone with a
bachelors degree.
Slide 28
Causes of Poverty Location On average, people who live in the
inner city and rural areas earn less than people living elsewhere.
On average, people who live in the inner city and rural areas earn
less than people living elsewhere.
Slide 29
Causes of Poverty Shifts in Family Structure Divorce rates and
children born to unmarried parents have increased dramatically
since the 1960s. This has resulted in more single-parent families
and more children living in poverty. Especially single mothers.
Divorce rates and children born to unmarried parents have increased
dramatically since the 1960s. This has resulted in more
single-parent families and more children living in poverty.
Especially single mothers.
Slide 30
Causes of Poverty Economic Shifts Workers without college-level
skills have suffered from the ongoing decline of manufacturing, and
the rise of service and high technology jobs. last hired, first
fired. Workers without college-level skills have suffered from the
ongoing decline of manufacturing, and the rise of service and high
technology jobs. last hired, first fired.
Slide 31
Causes of Poverty Racial and Gender Discrimination Some income
inequality exists due to hours worked, education, and experience.
Some income inequality exists due to hours worked, education, and
experience. However, some inequality exists in wages between whites
and minorities, and men and women. (despite progress, wage
discrimination continues). However, some inequality exists in wages
between whites and minorities, and men and women. (despite
progress, wage discrimination continues). Kennedy signing the Equal
Pay Act
Slide 32
Income Distribution in the United States Income Gap A 1999
study showed that the richest 2.7 million Americans receive as much
income after taxes as the poorest 100 million Americans. A 1999
study showed that the richest 2.7 million Americans receive as much
income after taxes as the poorest 100 million Americans.
Differences in skills and education, field of work, and
inheritances contribute to differences in income distribution (The
divide between rich and poor continues to climb). Differences in
skills and education, field of work, and inheritances contribute to
differences in income distribution (The divide between rich and
poor continues to climb).
Slide 33
Government Policies Combating Poverty Employment Assistance
Employment Assistance The minimum wage and federal and state
job-training programs aim to provide more job options for people
who lack skills. The minimum wage and federal and state
job-training programs aim to provide more job options for people
who lack skills. Welfare Reform Welfare Reform Temporary Assistance
for Needy Families (TANF) is a program which gives grants to the
states, allowing them to implement their own welfare assistance
programs. Temporary Assistance for Needy Families (TANF) is a
program which gives grants to the states, allowing them to
implement their own welfare assistance programs. Workfare programs
require work in exchange for temporary assistance. Workfare
programs require work in exchange for temporary assistance. Food
stamps are govt issued coupons that recipients exchange for food.
Food stamps are govt issued coupons that recipients exchange for
food.
Slide 34
2014 Poverty Guidelines 2014 POVERTY GUIDELINES FOR THE 48
CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA Persons in
family/householdPoverty guideline 1$11,670 1$11,670 215,730 319,790
423,850 527,910 631,970 736,030 840,090 For families/households
with more than 8 persons, add $4,060 for each additional
person.
Slide 35
Section 3 Assessment 1. An income level below which income is
insufficient to support a family or household is known as the (a)
income gap. (b) poverty rate. (c) poverty threshold. (d) income
inequality.
Slide 36
Section 3 Assessment 1. An income level below which income is
insufficient to support a family or household is known as the (a)
income gap. (b) poverty rate. (c) poverty threshold. (d) income
inequality.