10 Unemployment

10 Unemployment - Unemployment IDENTIFYING UNEMPLOYMENT How...

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Unemployment IDENTIFYING UNEMPLOYMENT How Is Unemployment Measured? Categories of Unemployment The problem of unemployment is usually divided into two categories, the long-run problem and the short-run problem. The natural rate of unemployment The cyclical rate of unemployment How is Unemployment Measured? Natural Rate of Unemployment The natural rate of unemployment is unemployment that does not go away on its own even in the long run. It is the amount of unemployment that the economy normally experiences. Cyclical Unemployment Cyclical unemployment refers to the year-to-year fluctuations in unemployment around its natural rate. It is associated with short-term ups and downs of the business cycle. 1. The natural rate of unemployment a. is a constant. b. is the desirable rate of unemployment. c. cannot be altered by economic policy. d. None of the above is correct. Describing Unemployment: Three Basic Questions How does government measure the economy’s rate of unemployment? What problems arise in interpreting the unemployment data? How long are the unemployed typically without work? Unemployment is measured by the Bureau of Labor Statistics (BLS). It surveys 60,000 randomly selected households every month. The survey is called the Current Population Survey. Based on the answers to the survey questions, the BLS places each adult into one of three categories: Employed Unemployed Not in the labor force Employed vs. unemployed The BLS considers a person an adult if he or she is over 16 years old. A person is considered employed if he or she has spent some of the previous week working at a paid job. A person is unemployed if he or she is on temporary layoff, is looking for a job, or is waiting for the start date of a new job. A person who fits neither of these categories, such as a full-time student, homemaker, or retiree, is not in the labor force. Labor Force The labor force is the total number of workers, including both the employed and the unemployed. 1
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The BLS defines the labor force as the sum of the employed and the unemployed. 2. Assuming everyone in the question below is in the adult population, which of the following is not correct? a. Elmo works part time as a baby sitter. The BLS counts him as employed and in the labor force. b. Anna is a full-time student not looking for a job. The BLS counts her as unemployed and in the labor force. c. Jim is on temporary layoff. The BLS counts him as unemployed and part of the labor force. d. Liz is seeking work, but has not found it. The BLS counts her as unemployed and in the labor force. 3. Who would be included in the labor force?
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This note was uploaded on 07/22/2009 for the course ECON 203 taught by Professor Nelson during the Fall '08 term at Texas A&M.

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10 Unemployment - Unemployment IDENTIFYING UNEMPLOYMENT How...

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