Chapter 6 & 7 - Unemployment and Inflation

Hyperinflation

Inflation rate in excess of 200 percent, lasting at least one year

Cyclical Unemployment

Joblessness that occurs when there simply aren't enough jobs to go around

How to Calculate Real Income

Nominal Income/ Price Index (CPI)

Underemployment

People seeking full-time paid employment who work only part-time or employ at jobs below their capability

Frictional Unemployment

Refers to people who are between jobs or just entering or re-entering the labor market. This type of unemployment is caused by workers voluntarily change jobs and by temporary lays-off.

Real Interest Rate

The norminal interest rate minus the anticipated inflation rate.

Labor Force Participation Rate

The percentage of the working- age population working or seeking employment

Relative Prices

The price of one good in comparison with the price of other goods.

Unemployment

The total number of people over 16 who are ready, willing, and able to work, who are actively looking for work but have been unsuccessful finding work.

P.P.I

keeps track of the average prices for producers

Real Income

nominal income adjusted for inflation; Income in constant dollars

Deflation

A decrease in the average level of prices of goods and services.

Base Period

A particular time period for which data is gathered and used as a benchmark against which economic data from other periods is measured.

Cost Push Inflation

A rise in prices due to an increase in the cost of the factors of production.

A.R.M

Adjustable Rate Mortgage. A mortgage (home loan) that adjusts the nominal interest rate to changing rates of inflation.

Labor Force

All persons over age 16 who either working for pay or actively seeking paid employment.

Demand Pull Inflation

An increase in the price level initiated by excessive aggregate demand

Inflation

An increases in the average level of prices of goods and services

Discouraged Workers

An individual who isn't actively seeking employment but would look for or accept a job if one were available

C.P.I

Consumer Price Index. A measure (index) of changes in the average price of consumer goods and services. Official measure of inflation

C.O.L.A

Cost of Living Adjustments. Automatic adjustments of nominal income to the rate of inflation.

During a period of unanticipated inflation...

Debtors are better off and creditors are worse off.

Norminal Income

The amount of money income received in a given time period, measured in current dollars .

Inflation Rate

The annual percentage rate of increase in the average price level.

Skill Gap

The difference in the skills required on the job and the actual skills possessed by the employees

Economic and Human Cost of Unemployment

The economic costs of unemployment include loss of GDP (it is below its potential level), loss or deterioration of human capital, retraining costs, and costs to the government (increased government benefit payments and reduced government tax revenue receipts).

Bracket Creep

The movement of taxpayers into higher tax brackets (rates) as nominal incomes grow

Natural Rate of Unemployment

The natural rate of unemployment is the normal rate of unemployment, consisting of structural and frictional unemployment. The natural rate of unemployment is also sometimes called the full-employment rate of unemployment or the non-accelerating rate of unemployment.

Money Illusion

The use of norminal dollars rather than real dollars to gauge changes in one's income or wealth

Seasonal Unemployment

Unemployment due to seasonal changes in employment or labor supply

Structural Unemployment

Unemployment that is caused by a long term change in demand, change in technology, or a change in the basic structure of the energy in the basic structure of the economy. These workers lack sufficient skills to obtain employment, nor can they easily move to locations where jobs are available.

Unemployment Rate

Unemployment/ Labor Force