Chapter 8

Shoe-leather costs

the increased costs of transactions caused by inflation.

Unit-of-account costs

(of inflation) costs arising from the way inflation makes money a less reliable unit of measurement.

Jobless recovery

a period in which real GDP growth rate is positive but the unemployment rate is still rising.

Real interest rate

he nominal interest rate minus the inflation rate.

Real income

income divided by the price level.

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.

Cyclical unemployment

the difference between the actual rate of unemployment and the natural rate of unemployment due to downturns in the business cycle.

Nominal interest rate

the interest rate in dollar terms.

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

Unemployment rate

the percentage of the total number of people in the labor force who are unemployed, calculated as unemployment/(unemployment + employment).

Interest rate

the price, calculated as a percentage of the amount borrowed, that a lender charges a borrower for the use of their savings for one year.

Disinflation

the process of bringing down inflation that has become embedded in expectations.

Menu costs

the real cost of changing a listed price.

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.

Job search

the time spent by workers in looking for employment.

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.

Structural unemployment

unemployment that results when there are more people seeking jobs in a particular labor market than there are jobs available at the current wage rate, even when the economy is at the peak of the business cycle.

Efficiency wages

wages that employers set above the equilibrium wage rate as an incentive for workers to deliver better performance.