Chapter 6

Chapter 6 - Kimberly Zhang Chapter 6 Natural rate of...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Kimberly Zhang Chapter 6 Natural rate of unemployment: the average rate of unemployment around which the economy fluctuates L = labor force, E = number of employed workers, U = number of unemployed workers o L = E + U, rate of unemployment = U/L s = rate of job separation, the fraction of employed individuals who lose their job each month, f = rate of job finding, fraction of unemployed individuals who find a job each month o If labor market is in a steady state, number of people finding jobs equals number of people losing jobs fU = sE fU = s(L – U) fU / L = s(1 – U/L) U/L = s/(s+f) Any policy aimed at lowering the natural rate of unemployment must either reduce the rate of job separation or increase the rate of job finding Any policy that affects the rate of job separation or job finding also changes the natural rate of unemployment Frictional unemployment: unemployment caused by the time it takes workers to search for a job o Workers have different preferences, abilities; jobs have different attributes
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/13/2009 for the course 220 204 taught by Professor Clare during the Spring '08 term at Rutgers.

Page1 / 3

Chapter 6 - Kimberly Zhang Chapter 6 Natural rate of...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online