ch 8: Unemployment and Inflation
Shoe-leather costs (of inflation)
the increased costs of transactions caused by inflation
Unemployment rate
the percentage of the total number of people in the labor force who are unemployed, calculated as unemployment/(unemployment + employment)
Disinflation
the process of bringing down inflation that has become embedded in expectations
Cyclical unemployment
the difference between the actual rate of unemployment and the natural rate of unemployment
Real interest rate
the nominal interest rate minus the inflation rate
Natural rate of unemployment
the normal unemployment rate around which the actual unemployment rate fluctuates; the unemployment rate that arises from the effects of frictional and structural unemployment
Underemployment
the number of people who work part-time because they cannot find full-time jobs
Labor Force Participation Rate
the percentage of the population age 16 or older that is in the labor force
Menu cost
the real cost of changing a listed price
Structural unemployment
unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate
Efficiency wages
wages that employers set above equilibrium wage rate as an incentive for workers to deliver better performance
Job Search
when workers spend time looking for employment
Nominal interest rate
the interest rate in dollar terms
Real Income
Income divided by the price level
Unit-of-account costs (of inflation)
costs arising from the way inflation makes money a less reliable unit of measurement
Discouraged Workers
individuals who want to work but who have stated to government researchers that they aren't currently searching for a job because they see little prospect of finding one given the state of the job market
Marginally attached workers
nonworking individuals who say they would like a job and have looked for work in the recent past but are not currently looking for work
Labor Force
the sum of employment and unemployment; that is, the number of people who are currently working plus the number of people who are currently looking for work
Employment
the total number of people currently employed for pay in the economy, either full-time or part-time
Unemployment
the total number of people who are actively looking for work but aren't currently employed
Real Wage
the wage rate divided by the price level
Frictional unemployment
unemployment due to time workers spend in job search
