MacroII - Macroeconomics Dr. Safarzadeh Chapters 6 - 12...

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Unformatted text preview: Macroeconomics Dr. Safarzadeh Chapters 6 - 12 Chapter 6 Monitoring Cycles, Jobs, & the Price Level Unemployment: People of age 16 or older who are not retired, have been looking for a job for the past 4 weeks, and are not able to find a job . Labor Force = Employed + Unemployed Chapter 6 Monitoring Cycles, Jobs, & the Price Level Some Labor Statistics: Population in the U.S.A almost 300 million, working age population 240 million, not in labor force 80 million, in labor force 160 million. Business Cycles: Expansion, Peak, Recession, Trough Distinction Between Nominal Wage and Real Wage: Real Wage is the quantity of goods and services that an hour of labor can buy. Real Wage = (Nominal Wage) / (Price Level) Real Wage and Money Illusion: As price level increases real wage decreases. The decrease in wage hurts labor and increases profit of the business. This may result in expansion of output. Chapter 6 Monitoring Cycles, Jobs, & the Price Level Cyclical Unemployment: Unemployment due to business cycles. Seasonal Unemployment: Unemployment in seasonal professions. Natural Rate of Unemployment: Sum of frictional and structural unemployment. Corresponds to full-employment . Frictional Unemployment: Unemployment due to new comers to job market and transition from one job to another. Structural Unemployment: Unemployment due to changes in technology. Chapter 6 Monitoring Cycles, Jobs, & the Price Level Wage Determination: By Collective Bargaining: Less than 25% of Workers, Mostly Low-Skilled Workers BY Individual Bargaining: 75% of Labor and Mostly High-Skilled Labor. Unemployment Rate is an Average for Nation. It varies with race, region, age, and gender. Reservation Wage: A Wage that Labor is Indifferent Between Working and Being Unemployed. Chapter 6 Monitoring Cycles, Jobs, & the Price Level Efficiency Wage: A Wage that Makes Labor Committed to Work and Feel Good about The Job. Economic Theory of Wage Determination: Wage is decided in the labor market through interaction of demand and supply for labor. Aggregate demand for labor is the horizontal sum of demand by firms. Demand for labor by firms is the same as the marginal product of labor . Supply of labor is decided through utility-maximizing behavior of labor, a choice between income and leisure . Chapter 6 Monitoring Cycles, Jobs, & the Price Level Inputs Production Function Output Y = AF(L, K) Y: Output L: Labor Input K: Capital Input A: Technology Factor (Labor, Land, Capital) Production Function and Demand for Labor: Production Function: The Most Efficient Combinations of Labor and Capital inputs that Produce Maximum level of Output. Chapter 6...
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MacroII - Macroeconomics Dr. Safarzadeh Chapters 6 - 12...

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