Chapter 10 econ

Lorenz Curve

A graph where economists show the distribution of income.

Consumer Price Index

A method for measuring inflation. It is found by a survey of several hundred goods in around 21,000 outlets. The prices of the goods and services are totaled and compared to an earlier point in time called the base year.

Inflation

A persistent increase in prices over a period of time.

Demand-Pull Inflation

The result of demand for goods and services exceeding their supply. This then forces prices to increase and it is usually found in times of war.

Compare and contrast Cost-push vs. Demand-pull inflation. Which is worse? Explain

Demand-pull inflation is when prices go up because the demand for goods and services exceed their supply. Cost-push inflation is an increase in prices when there's an increase in the cost of production. This is also the worst of the two inflations because GDP and employment goes down and price level goes up. While with Demand-pull at least the employment and GDP is going up.

Frictional Unemployment

Made of workers who are between jobs. They are short-termed unemployed and have little economic hardships. Most chose to leave their job for a better one, others lose their job but quickly find another one. Frictional Unemployment can be the result of new workers moving into the labor force.

Which 2 types of unemployment are the worst or most difficult to deal with? Explain

Structural unemployment and Cyclical unemployment are the most difficult to deal with. Structural is one of the worst because their skills no longer match the market place. They cannot get a job because their skills are not in demand. Cyclical is the second worse because you never know when the economy is going to get better and you do not know when the economy gets better if you will get your job back.

Explain the Lorenz Curve

The Lorenz Curve is a graph that shows the distribution of income. The vertical axis represents percent of income. The horizontal axis represents percent of family groups. The Lorenz curve falls below the line of perfect equality where on every point the horizontal percentage is the same as the vertical percentage. The closer the curve is to the line the more equal the distribution of income is.

Structural Unemployment

This unemployment is made of workers whose skills or abilities are no longer in demand. This has the most serious effect on the economy and the laid off worker. These people often need retraining and are usually middle aged or higher who have families to support.

Cost-push Inflation

When prices go up because there was an increase in the cost of production. Can be caused by increases in wages, rent, interest rates or the cost of raw materials.

Seasonal Unemployment

Workers who have been laid off because there job only occurs during parts of each year. This usually occurs with agriculture and construction workers. This unemployment can be painful but it also can be planned for.

Discouraged Worker

Workers who have given up looking for a job. They are not counted as unemployed when labor statistics are collected. They tend to be the least educated and least able to work. They need government help if they want to get out of poverty.

Cyclical Unemployment

Workers who have lost their jobs because of a recession or downturn in the economy. They can go through great economic hardships because they can be long-term unemployed. But there is an expectation that when the economy improves they will gain back their jobs.