Econ Topic 6.1 - Macroeconomics(Part 2 Unemployment Fiscal...

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Macroeconomics (Part 2) Unemployment, Fiscal and Monetary Policies Principles of Economics (ECN30205)
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Objectives In this topic, we will look at: What is unemployment and its causes Macroeconomic solutions to unemployment
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Unemployment & its Causes
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Unemployment & its Causes During the 2009 financial crisis, the U.S. population suffered massive unemployment problems. At the height of crisis, tens of millions of people lost their jobs.
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Unemployment & its Causes So what is unemployment? Why is it considered a serious problem for countries around the world? And what can we do about it? During the Great Depression of 1929, 1 out of every 4 qualified worker lost their jobs. The misery and suffering caused by this problem is inestimable.
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Unemployment & its Causes Let’s begin with some definitions: The unemployed refers to those individuals who do not currently have a job but are actively seeking for one .* On the other hand, the employed are those who currently have jobs . * People who are jobless but not actively looking for work are not counted as unemployed .
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Unemployment & its Causes Together, the employed and unemployed comprise the labor force : Labor force = employed + unemployed For example, if Country A has 16.5 million people employed and 3.5 unemployed, then what is its total labor force?
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Unemployment & its Causes The unemployment rate refers to the percentage of labor force actively looking for work but are currently unemployed : unemployment rate = unemployed labor force Referring to our previous example, what is the unemployment rate of country A? X 100%
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Unemployment & its Causes Lastly, the labor participation force rate refers to percentage of people 16 years of age and older that is in the labor force : Labor force participation rate = labor force population 16 years & older So if the population of 16 years and older in country A is 30 million, then what is its labor force participation rate? X 100%
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Unemployment & its Causes This also means that the other 33% of population of 16 years and older in country A are not actively seeking work * for one reason or another. * Remember, the labor force only includes those who are employed and those who are actively looking for work .
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Unemployment & its Causes Review Exercises: Based on the data below, determine the labor force, unemployment rate and labor force participation rate of Malaysia in 2013. Identify 4 different reasons why people may not be actively looking for work. Population, 16 yrs. & above Employed Unemployed 2013 19.5 million 12.7 million 0.35 million
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Unemployment & its Causes So why does unemployment happen? Generally, there are 3 reasons: Cyclical reasons Frictional reasons Structural reasons
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Unemployment & its Causes Cyclical reasons: Our economies experience fluctuations over time i.e. sometime our real GDP is growing (i.e.
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