End of Topic III 3/06/12 * Calculating Unemployment-Related Terms
-Total population-All persons in the United States.
-Civilian non-institutional population- All persons over the age of 16 who are not in the military or institutionalized.
-Employment- Persons actually working.
-Unemployment- persons not working but actively seeking work. * Unemployment Rate-
-The percentage of the civilian labor force that is unemployed.
-Unemployment Rate = (Unemployment/Civilian Labor Force) x100 * U.S. Labor Market Statistics, 2012(millions of persons)- total population 313.9
Civilian noninstitutional population 243.3
Civilian force labor 155.1 Employment 142.4
Unemployment 12.7 * Calculation of the Unemployment Rate, 2011
-Unemployment rate = (12.7/155.1)x100
-Unemployment rate = 8.2% * Setting an Unemployment Goal
-Is 0% unemployment a feasible unemployment rate gal?
-Macroeconomists consider some unemployment to occur “naturally” i.e.., it is presen, even when the economy is full employed. * Types of Unemployment
-Frictional Unemployment
-Structural Unemployment
-Seasonal unemployment
-Cyclical unemployment * Frictional Unemployment
-“The unemployment that arises from normal labor turnover”
-Example- You quit your job to look for a better elsewhere.
-A certain amount of frictional unemployment is assumed to occur naturally, even when the economy is fully employed. * Structural Unemployment
-“The Unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs.”
-Example- A person in a manufacturing plant loses her job because of outsourcing.
- A certain amount of structural unemployment is assumed to occur naturally, even when the Seasonal Unemployment
-“The unemployment that arises because of seasonal patterns”
-Example- A high school student is unable to find a job in June, when school is not in session.
-A certain amount of seasonal unemployment is assumed to occur naturally eve when the economy is fully employed. * Cyclical Unemployment
-“The fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion”
-Cyclical unemployment is not considered to be natural.
-when cyclical unemployment is present, the economy is not considered to be fully employed. * Full Employment
-“When there is no cyclical unemployment or, equivalently, when all the unemployment is frictional, structural, or seasonal.” * Natural Unemployment rate
-“The unemployment rate when the economy is at full employment”.
-Currently assumed to be 6%.
3/18Topic IV * We will develop a macroeconomics model to help understand and make predictions about short and long-run movements in output (real GDP), the price level and unemployment * Review macroeconomics goals-
-Economic growth-measured using real GDP
-Stable prices- measured using the consumer price index
-Low unemployment- measured using the unemployment rate
-Observation-Long run- the economy tends to grow at an average annual rate of about 3% per year. Potential GDP * Aggregate demand- Aggregate Supply (AD-AS) model uses a variation of the traditional supply-demand format to explain both long and short run movements in real GDP. * Characteristics of aggregate demand- supply model. * Two of the three key macroeconomic goals (economic growth and stable prices) are reflected by the graphs axis. * The other key goal (low unemployment) can be inferred from the position of actual GDP relative to potential GDP * Explaining movements in potential GDP- forces that increase potential GDP
-Increase in labor force
-increase in capital stock
-improvements in technology * Potential GDP
-The value of real GDP when all the economy factors of production…. Are fully employed”