9-17-07 - Real Wages -Wage increases. because of inflation...

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Real Wages -Wage increases. ... because of inflation -adjust using GDP deflation, we get "real wage" -over time, real wage increases (except for bottom earners) -become unemployeed for 3 reasons. .. -lose job. . still looking -leave job. .. still looking -leave labor force -become re-employeed for 2 reasons -get job -leave labor force 3 types of unemployement 1-frictional -normal labor turnover people entering/leaving jobs and being created/destroyed -some frictional unemployeedment is good -cannot be zero 2-structural -technology changes make some jobs obsolete -some structural unemployement is good -cannot be zero 3-Cyclical -unemployement due to business cycle -can be zero Full employment -full emp=cyclincal unemployment is zero -in other words, all unemployment is due to frictional and structural -unemployment rate at full employment is "natural rate of unemployment" -when real GDP> pot GDP, unemployment rate< natural rate -when real GDP<Pot GDP, unemployment rate>natural rate Inflation -to measure price level, consumer price index (CPI)
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9-17-07 - Real Wages -Wage increases. because of inflation...

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