Unemployment 5,655,000Unemployment Rate = Labor Force x 100; 4.0% = 140,863,000 x 100 [Employed + unemployed] [135,208,000+5,655,000]
In Forney, 42 are unemployed & 658 are employed. The unemployment rate is __%.One mil. are unemployed & 19 mil. are employed. The unemploy. rate is __%.65 NS 4141. If the total population is 280 million, and the civilian labor force includes 129,558,000 with jobs & 6,739,000 unemployed but looking for jobs, then the unemployment rate would be ____%. 4.9[6,739,000/136,297,000 x 100 = 4.9%]
Negative/Positive GDP GapsNatural Rate of Unemployment [4-6%]AD3AD1AD2AS11% 6% 1%YR Y*F YiYA YP YA$9 T $10 T $11 TRecessionary GDP GapInflationary GDP Gap
Three Types of UnemploymentFrictional temporary, transitional, short-term.(between jobs or search unemployment)
Examples:People who get fired or quit to look for a better one.2. Graduates from high school or college who are looking for a job.3. Seasonal or weather-dependent jobs such as agricultural, construction, retail, or tourism. [lifeguards, resort workers, Santas, & migrant workers.]Frictional unemployment signals that new jobs are availableand reflects freedom of choice.These are qualified workers transferable skills.
2. Structural UnemploymentStructural technological or long term. There are basic changes in the structure of the labor force which make certain skills obsolete.
Automation may result in job losses.Consumer taste may make a good obsolete.The auto reduced the need for carriage makers.Farm machinery reduced the need for farm laborers.Creative destruction means as jobs are created, other jobs are lost. Jobs of the future destroy jobs oftoday. Frictional and Structural make up the naturalrate of unemployment.
These jobs do not come back.Non-transferable skills choice is prolonged unemployment or retraining.
3. Cyclical UnemploymentCyclical economic downturns in the business cycle.Cyclical fluctuations caused by deficient ADDurable goods jobs are impacted the most.These can be postponed because they can be repaired.Cyclical unemployment is real unemployment. These jobs do come back.
Survey on UnemploymentBLS calls 60,000 households every month. They ask three questions: 1. Are you working? If the answer is no, 2. Did you work at all this month-even 1 day? You are a member of the LF if yes on 1 or 2.
3. Did you look for work during the last month? [agency, resume, interview] A yes counts you aspart of the LF. A no means you are not counted.You are a discouraged worker. The labor force consists of the employed and unemployed.
1. A man working for Ford Motor Company is replaced by a robot.2. A homebuilder loses his job during the recession because houses are not selling.3. A person who has worked his way through medical school (he has now graduated) has quit his job as a cook at McDonalds and is interviewing to become a brain surgeon.4. Automation has cost Alexandria her office job. 5. Now that the economy has improved from a business contraction, Rick is looking to get his old job back at Ford.6. A California citrus picker is temporarily unemployed because of the weather.7. A bank teller loses her job to an ATM machine.8. Santa lost his job after Christmas.9. A Lynch student graduates after 7 years in high school (had to repeat econ 4 times) & is trying to get her first job at Arbys.10. Joel is fired at Wendys but is interviewing at McDonalds..1. B 2. C 3. A 4. B 5. C 6. A 7. B 8. A 9. A 10. AUnemployment QuizA. Frictional B. Structural C. Cyclical
NS 15-2115. The business cycle is defined as the _______ and _______ in business activity.
A. EXPANSION B. PEAK C. CONTRACTION D. TROUGH
___ 16. High point of expansion___ 17. Period of growth (GDP increases)___ 18. Bottoming out of business activity___ 19. Laid off workers are called back.___ 20. Near or at full employment (4-6%)___ 21. Have averaged 11 months since W.W.II. upturnsdownturnsBDABCA
NS 31-49 31. (Frictional/Structural/Cyclical) is temporary, short-term unemployment.32. (Frictional/Structural/Cyclical) is technological, long-term unemployment.33. (Frictional/Structural/Cyclical) is unemployment resulting from recessions.
A. FRICTIONAL B. STRUCTURAL C. CYCLICAL
___ 34. Michael lost his job due to the recession [business cycle downturn].___ 35. College graduate is searching for his first job.___ 36. Amanda is quitting Wendys to work at McDonalds.___ 37. There are job losses at Ford due to a decrease in AD.___ 38. Lifeguards in the winter and Santas during the spring.___ 39. The auto replaces carriage makers.___ 40. ATM machines replace bank tellers.
45. The cost of unemployment can be measured by the amount by which (potential/actual) GDP exceeds (potential/actual) GDP.46. If the unemployment rate is 8%, we can infer that the (potential/actual) GDP is in excess of (potential/actual) GDP.47. (Inflation/Disinflation/Deflation) is a general increase in prices.48. (Inflation/Disinflation/Deflation) is a decline in prices.49. (Inflation/Disinflation/Deflation) is a decrease in the rate of inflation. CFFCFSS
AD/AS Primer - No Recessionary/Inflationary GapE No INFLATIONARY or RECESSIONARY GAP [Y*]Potential output[$10 tr.] equals actual output[$10 tr.]Actual unempl. rate[6%] equals potential unempl. rate[6%]6% Y*F$10 tr.[Frictional+Struc.]3%Unemployment1. Frictional a. quit for better job b. fired c. graduated d. seasonal2. Structural [technological] replaced by machinery 3. Cyclical downturn in business cycle [real unemployment]Real GDPADASFE GDP Bulls EyeE
OKUNS LAWFor every one percentage point by which the actual unemployment rate exceeds the "natural" rate of unemployment, real gross domestic product is reduced by 2% to 3%. That is, unemployment above the inflation-threshold unemployment rate reduces GDP below potential output, and for every 1% excess of the natural unemployment rate, a 2% to 3% reduction in GDP is predicted. The difference between actual and potential GDP is called the GDP gap. It may be expressed as a percentage or an absolute amount.
Okuns LawGDP Gap = Unemployment Rate over 6% x27.5% unemployment, so 1.5 x 2% = 3%.[$3 bil. GDP Gap($100 Bil. nominal GDPx3%; or $100 B x .03 =$3 B.)
1. Unemployment is 7%; Nominal GDP is $200 billion. Real unemp. is __%. The % gap is __%. Y being forgone is $__ B.
2. Unemployment is 8%; Nominal GDP is $500 billion. Real unemp. is __%. The % gap is __%. Y being forgone is $__ B.
3. Unemployment is 10%; Nominal GDP is $100 billion. Real unemp. is __%. The % gap is __%. Y being forgone is $__ B.GDP Gap (Okuns Law)Unemployment Rate above 6% x 224420 88 124 NS 43 & 4443.Unemployment is 17%. Nominal GDP is $200 billion. What % is the GDP gap? __% What output is forgone? $___44. Unemployment is 16%. Nominal GDP is $300 billion. What % is the GDP gap? __% What output is forgone? $___ 22442060
NS 50, 51, & 5250.The CPI was 166.6 in 1999 and 172.2 in 2000. Therefore, the rate of inflation for 2000 was (2.7/3.4/4.2)% 51. If the CPI falls from 160 to 149 in a particular year, the economy has experienced (inflation/deflation) of (5/-4.9/-6.9)%.52. If CPI rises from 160.5 to 163.0 in a particular year, the rate of inflation for that year is (1.6/2.0/4.0)%. [-11/160 x 100 = -6.9%] (2006-later year) (2005-earlier year) Current years index last years index 199.1 192.7 [6.4]C.P.I. = Last years index(earlier year) x 100; 192.7 x100 = 3.3%
130.7-124.0(6.7) 116-120(-4) 333-300(33) 124.0 x 100 = ____ 120 x 100 = ____ 300 x 100 = ____Figuring Inflation[Change/Original X 100 = inflation]5.4%-3.3%11%[5.6/166.6 x 100 = 3.4%]So, 3.3% increase in SocialSecurity benefits for 2007
Consumers in this economy buy only two goodshot dogs & hamburgers.Step 1. Fix the basket. What percent of income is spent on each. Consumers in this economy buy a basket of: 4 hot dogs and 2 hamburgers
Step 2. Find the prices of each good in each year. YearPrice of Hot DogsPrice of Hamburgers 2001 $1$2 2002 $2 $3
Step 3. Compute the basket cost for each year. 2001 ($1 per hot dog x 4 = $4) + ($2 per hamburger x 2 = $4), so $8 2002 ($2 per hot dog x 4 = $8) + ($3 per hamburger x 2 = $6), so $14
Step 4. Choose one year as a base year (2001) and compute the CPI 2001 ($8/$8) x 100 = 100 2002 (14/$8) x 100 = 175
Step 5. Use the CPI to compute the inflation rate from previous year 2002 (175/100 x 100 = 175%) or to get actual % (175-100)/100 x 100 =75%
(42%) 18. Suppose that a typical consumer buys the following quantities of these three commodities in 2000 and 2001.
CommodityQuantity2000 per Unit Price2001 per Unit PriceFood5 units $6.00 $5.00Clothing2 units $7.00 $9.00Shelter3 units $12.00$19.00
Which of the following can be concluded about the CPI for this individual from 2000 to 2001? a. It remained unchanged.c. it decreased by 20% b. It decreased by 25%.d. It increased by 20% e. It increased by 25%.(Answer) Year 1 : [5 food x $6 = $30; 2 clothing x $7 = $14; 3 shelters x $12 = $36,for dollar value of $80. CPI = 100 ($8