chp 9 macro

inflation rate

% increase in the price level from one year to the next

Efficiency wage:

An above-market wage that a firm pays to increase workers' productivity.

Substitution bias

Consumers may change their purchasing habits away from goods that have increased in price

Increase in quality bias:

Difficult to separate improvement in quality from increase in price, say in cars or computers.

natural rate of unemployment

Economists call this the natural rate of unemployment: The normal rate of unemployment, consisting of frictional unemployment and structural unemployment. The general consensus of economists is that the U.S. natural rate of unemployment is somewhere between 5 percent and 5.5 percent.

discouraged workers

People who are available for work, but have not looked for a job during the previous four weeks because they believe no jobs are available for them.

New product bias:

The basket of goods changes only every 10 years. There is a delay to including new goods like cell phones.

Cyclical unemployment

Unemployment causes by a business cycle recession Unemployment causes by a business cycle recession. In normal recoveries after a recession, unemployment due to cyclical factors will fall. When all unemployment is due to frictional and structural factors, we say that the economy is at full employment. This means there will always be some unemployment in the economy.

Structural unemployment

Unemployment that arises from a persistent mismatch between the skills and attributes of workers and the requirements of jobs

producer price index

average of prices reeived by producters of the goods and servcese at all stages of the production process

employment-pop ratio

employment/working age pop X100

CPI eq.

expenditures in the current year/expendititues in the base year X100

laborforce/working-agepopulation

labor force/working-age population X100

consumer price index

measure of average change over time in the prices of typial urban family

price level

measure of the average prices of goods and services in econ

unemployed rate

number of unemployed/ labor force )X100

frictional unemployment

short-term uunemployment that arises from the process of matching workers with jobs. Frictional unemployment occurs mostly because of job search: entering or re-entering the labor force, or being between jobs. It also occurs because of seasonal unemployment: some jobs fluctuate in availability due to seasonal demand, like ski-instructor or farm-work. To control for this, the BLS releases raw and seasonally-adjusted employment figures. Some frictional unemployment actually increases economic efficiency by allowing for better job matches.

enemployed

someone who is not currently at work but who is available for work and who had actively looked for work during the previous month

unemployment rate

the percentage of the labor force that is unemployed

Labor force

the sum of employed and unemployed workers in the econonomy

employed

worked 1+ hr hrs in reference week