Econ Studyguide.

# Econ Studyguide. - 1 Yellow = I know this but it helps to...

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1 Yellow = I know this, but it helps to quiz me over it. Red = Quiz now! Purple = Important, Iffy. Econ Studyguide. Test Three. Chapter 15. Unemployment: o Natural Rate of Unemployment: An average over time that is usually around 5%. o Cyclical Unemployment: This varies around the natural rate. If you look at a graph over time, unemployment will vary, but it moves in cycles. If you took an average over time, that would be the natural rate. The BLS measures cyclical unemployment. BLS Procedure: o 1. WAP vs. Non-WAP. WAP: Working Age Population. The non-institutionalized civilian population. Non-WAP: Younger than 16 or institutionalized. o 2. The Labor Force: Non-LF: This means that you are not looking for a job and don’t have a job. IE: Retired people, full-time students. o 3.Employed vs. Unemployed: Unemployed: You must be seeking work and available for work. o 4. Formula: Number of unemployed people/ labor force. o If someone who was working retired, the unemployment rate goes up. Labor Force Participation Rate Formula: o Labor force / working age population. o A big factor in the labor force participation rate for women was WWII. It went up, but has shown no growth in recent years. Does the Unemployment Rate Measure What We Want? o 1. Movement into and out of the labor force is pretty common. There is a ton of movement. Because there’s so much movement, it’s hard to estimate. This is one problem with it. o 2. Discouraged Workers: Individuals who would like to work but have given up looking for a job. They report being out of the labor force, but want to work. They have tried to find a job but have given up after an unsuccessful search. They do NOT show up in unemployment statistics, even though they are workers without jobs.

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2 This is another problem with the unemployment rate because it becomes skewed. Types of Unemployment: o 1. Frictional Unemployment: People moving between jobs to find the right job. Cause: This is caused when the demand for one good increases, the demand for another good increases. o In this case, the labor will flow from good #2 to good #1. We reduce frictional unemployment through unemployment agencies. We raise frictional unemployment through unemployment insurance. This is a government program with a counterintuitive side effect. o 2. Structural Unemployment: This is when the wage we see in a market is greater than the equilibrium wage. This is very specific. Causes: Minimum Wage: The higher the wage, the fewer people firms want to hire. Unions: They cause wage to be greater than the equilibrium wage. o
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Econ Studyguide. - 1 Yellow = I know this but it helps to...

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