AP Macroeconomics: 2C

What does full employment mean ?

Full employment means NO cyclical unemployment - Economists generally agree that an employment rate of around 4 to 6 % is full employment.

What is an example of frictional unemployment?

High school or college graduates looking for a job. Fired, or looking for a better job.

When are we in full employment?

We are in full employment if we have only the natural rate of unemployment - This is the normal amount of unemployment

Okun's Law

When unemployment rises 1% above the natural rate, GDP falls by 2%

Structural unemployment

- Changes in the structure of the labor force make some skills obsolete - Workers DO NOT have transferable skills and these jobs will never come back - Workers must learn skills to get a job - The permanent loss of these jobs is called creative destruction

Race/ age Inequalities

- Hispanics: 5.8% for January - African American:8.9% for January - Teenager:15.3% for January

Frictional Unemployment

-" Temporarily unemployed" or being between jobs -Individuals are qualified workers with transferable skills but they aren't working

What are the criticisms of unemployment rate?

-Discouraged job seekers - Part-time workers - Race/ age Inequalities - Illegal Labor

This is the normal amount of unemployment we should have

-The number of job seekers equal the number of job vacancies

Seasonal Unemployment

-This is a specific type of unemployment which is due to time of year and the nature of the job -These jobs will come back

The Natural Rate of Unemplyment

2 of the 3 types of unemployment are unavoidable - Frictional unemployment - Structural unemployment Together they make up the national rate of unemployment

Why is a stay at home mom not unemployed?

Because she did not choose to work

What are the three types of unemployment?

Frictional Structural Cyclical

What is the equation for unemployment rate?

Unemployment= # unemployed/ # in labor force x 100

Illegal labor

Many people work under the table

Unemployment

NRU

What are some examples of structural unemployment?

VCR repairmen and carriage makers

What is an example of seasonal unemployment?

Professional Santa Claus impersonators, and construction workers in Michigan.

What is a subcategory under frictional unemployment?

Seasonal Unemployment

Discourages job seekers

Some people are no longer looking for a job because they had given up

Part-time workers

Someone who wants more shifts but can't get them is still considered employed

What is an example of cyclical unemployment

Steel workers laid off during recessions - Restaurant owners fire waiters after three months poor sales due to recession

What is a subcategory under structural unemployment?

Technological Unemployment

The unemployment rate

The percent of people in the labor force who want a job but are not working - Above 16 years old -Able and willing to work - Not institutionalized (jails, hospitals) - Not in military, in school full time, or retired.

Technological Unemployment

Type of structural employment where automation and machinery replace workers causing unemployment ex/ auto assemblers fired as robots take over production Producers of capital goods (tractors) fire assemblers

Cyclical Unemplyment

Unemployment that results from economic downturns (recessions ) - As demand for goods and services falls, demand for labor falls and workers are fired