Principles of Economics- Mankiw (5th) 569

Principles of Economics- Mankiw (5th) 569 - CHAPTER 26 U N...

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CHAPTER 26 UNEMPLOYMENT AND ITS NATURAL RATE 587 WHY ARE THERE ALWAYS SOME PEOPLE UNEMPLOYED? We have discussed how the government measures the amount of unemployment, the problems that arise in interpreting unemployment statistics, and the findings of labor economists on the duration of unemployment. You should now have a good idea about what unemployment is. This discussion, however, has not explained why economies experience un- employment. In most markets in the economy, prices adjust to bring quantity sup- plied and quantity demanded into balance. In an ideal labor market, wages would adjust to balance the quantity of labor supplied and the quantity of labor de- manded. This adjustment of wages would ensure that all workers are always fully employed. Of course, reality does not resemble this ideal. There are always some workers without jobs, even when the overall economy is doing well. In other words, the unemployment rate never falls to zero; instead, it fluctuates around the natural
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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