Chapter 23 - Unemployment and Inflation
factors that change the natural rate of unemployment
- changes in labor force statistics - changes in labor market institutions - changes in government policies
factors that change the rate of structural unemployment
- minimum wages - labor unions - efficiency wages - side effects of government policies - mismatches between employees and employers
unit-of-account costs
arise from the way inflation makes money a less reliable unit of measurement
underemployed
the number of people who work part time because they cannot find full-time jobs
unemployment rate
the percentage of the total number of people in the labor force who are unemployed
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 inflation down
menu cost
the real cost of changing a listed price
labor force
the sum of employment and unemployment - of people currently working and people currently looking for work
employment
the total number of people currently employed, either full time or part time; excludes retirement and disability
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 the time workers spend in job search
natural rate of unemployment
unemployment rate that arises from the effects of frictional plus structural unemployment - normal rate to which the actual unemployment rate fluctuates
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.
real interest rate
the nominal interest rate minus the rate of inflation
inflation rate
Price Index in year 2 - Price Index in year 1 / Price Index in year 1 x 100
jobless recovery
a period in which the real GDP growth rate is positive but the unemployment rate is still rising
normal unemployment =
frictional unemployment + structural unemployment
real income
incomes divided by the price level
shoe-leather costs
increased costs of transactions caused by inflation
labor force participation rate
labor force/population age 16 and over x 100
actual unemployment
natural unemployment + cyclical unemployment
discouraged workers
nonworking people who are capable of working but have given up looking for a job given the state of the job market
unemployment rate =
number of unemployed workers / labor force x 100
cyclical unemployment
the deviation of the actual rate of unemployment from the natural rate due to downturns in the business cycle.
nominal interest rate
the interest rate expressed in dollar terms
efficiency wages
wages that employers set above the equilibrium wage rate as an incentive for their workers to perform better.
job search
workers who spend time looking for employment
marginally attached workers
would like to be employed and have looked for a job in the recent past but are not currently looking for work
