Unemployment

What is unemployment

-% of people in the labor force who want a job are not working.

Employed

-at least 1 hr worked a month

-temporarily absent from work

-part time workers

(NOT IN THE LABOR FORCE)

-kids

-full time students

-retirees

-military personal

-those in mental institution 

-incarcerated people

-stay at home mom and dads

Discouraged 

-people who are mentally and socially beaten down when applying for a job. 

Metrics- 4-5%  

Labor force- Unemployed + employed

Frictional Unemployment-Temporarily unemployed or between jobs

Seasonal Unemployment- Specific type of frictional unemployment which is due to time and years.

Structural Unemployment- Changes in structure of the labor force, making skills obsolete.

Cyclical Unemployment- Unemployment due to recession

Frictional + Structural= Natural Rate of unemployment, (4-5%) Full employment

Full employment means no Cyclical unemployment.

Okun's Law- When unemployment rises 1% above the natural rate, GDP falls by 2% 

Inflation

Inflation- A general rising level of prices. It reduces the "purchasing power"

Causes- Gov't prints too much money (the quantity theory) 

Demand- pull inflation- "too many dollars chasing too few goods 

Demand pulls prices upward 

Cost- Push Inflation 

Higher Production cost increases prices.

Standard Inflation Rate is 2-3%

Rule of 70- Used to calculate the number of years it will take for the price level to double at any given rate of inflation 

Deflation- Decline of the price level 

Disinflation- Occurs when the inflation rate itself declines

Nominal and Real Interest Rate( borrowing money) 

Real Interest Rate- The % increase in purchasing power that a borrower pays to the lender/ adjusted for inflation.

COLA- Cost of Living Adjustments, some works have salaries that mirror inflation. They negotiated wages that rise with inflation.

Real and Nominal GDP

Nominal GDP- Value of output produced in current prices 
- current prices
- PxQ- output

Can increase from year to year if output increases or input increases


Real GDP- Value of output produced in constant based year prices 
-Adjusted for inflation
-constant (base year) prices 
-PxQ
-measure economic growth 
-can increase from year to year only if output increase in the base year- nominal and real GDP are equal

In years after base year, nominal exceed GDP  
Base year is usually earliest year listed