CHAPTER 23
A jobless recovery is a period in which
the real GDP growth rate is positive but
UNEMPLOYMENT RATE CALCULATIONS Unemployment is the number of people who are
the unemployment rate is still rising.
actively looking for work but aren’t currently
employed.
LABOR FORCE PARTICIPATION RATE
EMPLOYMENT & GROWTH Discouraged workers are nonworking people who
are capable of working but have given up looking
for a job given the state of the job market.
CYCLICAL is the deviation of the actual rate of Marginally attached workers would like to be
unemployment from the natural rate, that employed and have looked for a job in the recent
UNEMPLOYMENT
UNEMPLOYMENT RATE arises from the downturns of the business past but are not currently looking for work.
cycle
FRICTIONAL UNEMPLOYMENT
Frictional unemployment is unemployment due to the
time workers spend in job search.
NATURAL RATE OF UNEMPLOYMENT The economy is more productive if workers take the
time to find jobs that are well matched to their skills
The unemployment rate reaching
O is infeasible, there will always
be unemployment STRUCTURAL
In structural unemployment, more people are seeking
jobs in a particular labor market than there are jobs
CHANGES IN THE NATURAL RATE OF UNEMPLOYMENT available at the current wage rate.
Changes in labor force characteristics
REASONS
UNEMPLOYMENT Change in labor market institutions: If wages for
Minimum wage
Unions: upper wages bc of increased bargaining
AND INFLATION unskilled workers can’t go down, due to a minimum
wage there will be increased structural
power reduces the demand of workers
unemployment , a higher nature rate of unemployment Efficiency wages
arises during periods of faster tech change Government policies
Mismatches between employees and employers
Changes in gob. policies: less preassure find job
WINNERS AND LOSERS FROM INFLATION
INFLATION AND DEFLATION
The interest rate on a loan is the price, calculated as a
SHOE-LEATHER COST percentage of the amount borrowed, that lenders charge
A high inflation rate, discourages people from borrowers the use of their savings for one year.
holding money. The nominal interest rate is the interest rate in dollar terms
Increased costs of transactions caused by The real interest rate is the nominal interest rate minus the
inflation are known as shoe-leather costs, INFLATION RATE IMPORTANCE rate of inflation.
MENU COST If the actual inflation rate is higher than expected, borrowers
The menu cost is the real cost of changing a gain at the expense of lenders: borrowers will repay their loans
listed price. with funds that have a lower real value that have been expected
A classic example is a restaurant that has to
physically print new menus when it changes
the prices of its dishes
DISINFLATION
UNIT-OF.ACCOUNT COST Disinflation is the process of bringing
the inflation rate down.
The unit-of-account costs of inflation are the
costs arising from the way inflation makes
money a less reliable unit of measurement.
A jobless recovery is a period in which
the real GDP growth rate is positive but
UNEMPLOYMENT RATE CALCULATIONS Unemployment is the number of people who are
the unemployment rate is still rising.
actively looking for work but aren’t currently
employed.
LABOR FORCE PARTICIPATION RATE
EMPLOYMENT & GROWTH Discouraged workers are nonworking people who
are capable of working but have given up looking
for a job given the state of the job market.
CYCLICAL is the deviation of the actual rate of Marginally attached workers would like to be
unemployment from the natural rate, that employed and have looked for a job in the recent
UNEMPLOYMENT
UNEMPLOYMENT RATE arises from the downturns of the business past but are not currently looking for work.
cycle
FRICTIONAL UNEMPLOYMENT
Frictional unemployment is unemployment due to the
time workers spend in job search.
NATURAL RATE OF UNEMPLOYMENT The economy is more productive if workers take the
time to find jobs that are well matched to their skills
The unemployment rate reaching
O is infeasible, there will always
be unemployment STRUCTURAL
In structural unemployment, more people are seeking
jobs in a particular labor market than there are jobs
CHANGES IN THE NATURAL RATE OF UNEMPLOYMENT available at the current wage rate.
Changes in labor force characteristics
REASONS
UNEMPLOYMENT Change in labor market institutions: If wages for
Minimum wage
Unions: upper wages bc of increased bargaining
AND INFLATION unskilled workers can’t go down, due to a minimum
wage there will be increased structural
power reduces the demand of workers
unemployment , a higher nature rate of unemployment Efficiency wages
arises during periods of faster tech change Government policies
Mismatches between employees and employers
Changes in gob. policies: less preassure find job
WINNERS AND LOSERS FROM INFLATION
INFLATION AND DEFLATION
The interest rate on a loan is the price, calculated as a
SHOE-LEATHER COST percentage of the amount borrowed, that lenders charge
A high inflation rate, discourages people from borrowers the use of their savings for one year.
holding money. The nominal interest rate is the interest rate in dollar terms
Increased costs of transactions caused by The real interest rate is the nominal interest rate minus the
inflation are known as shoe-leather costs, INFLATION RATE IMPORTANCE rate of inflation.
MENU COST If the actual inflation rate is higher than expected, borrowers
The menu cost is the real cost of changing a gain at the expense of lenders: borrowers will repay their loans
listed price. with funds that have a lower real value that have been expected
A classic example is a restaurant that has to
physically print new menus when it changes
the prices of its dishes
DISINFLATION
UNIT-OF.ACCOUNT COST Disinflation is the process of bringing
the inflation rate down.
The unit-of-account costs of inflation are the
costs arising from the way inflation makes
money a less reliable unit of measurement.
