Class Notes - 10-19-07

Class Notes - 10-19-07 - Labor Force [LF] = E + U...

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Macroeconomics – Class Notes – 10/19/07 CHAPTER 15: THE NATURAL RATE OF UNEMPLOYMENT 5-6% average unemployment Natural rate of unemployment is about at least 4% in a normally functioning economy. UNEMPLOYMENT DEFINED Unemployment: o “Lowers living standard, creates anxiety” 2 categories: o Natural Rate of unemployment o Cyclical Rate of unemployment MEASURING UNEMPLOYMENT Adult population [Age 16] Unemployed [ U ] if: o On temporary layoff o Looking for job o Waiting for start of new job NOT IN LABOR FORCE (NLF) Some students Homemaker/housewife/househusband Retirees Discouraged workers (not employed and not actively looking for a job) MEASURING UNEMPLOYMENT Adult Population = [Adults aged 16+] = LF + NLF
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Unformatted text preview: Labor Force [LF] = E + U Unemployment Rate: URate = [(U) / (LF)] * 100 MEASURING UNEMPLOYMENT Labor-force Participation Rate: o Fraction of population working for pay or looking for work Labor-force Participation Rate is: o P Rate = (LF / A16+) * 100 o P Rate = (100 million / 120 million) * 100 o P Rate = 83.3% UNEMPLOYMENT RATE MEASUREMENT CORRECT ? Measured Unemployment rate too LOW due to: o Underemployment (Nuclear physicist working as a steel worker instead [not good] ) o Discouraged workers Most unemployment: only a few jobless a long time. o Average duration is short (less than 10 weeks) for most unemployed (75% of unemployed)....
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Class Notes - 10-19-07 - Labor Force [LF] = E + U...

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