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Test 2

# Test 2 - Test 2 Ch 15 Econ(unemployment chapter Things that...

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Test 2 Ch. 15 Econ (unemployment chapter) Things that change unemployment rate U rate=U/U+E Ex. High schooler drop out and now available + seeking work…what happens to unemployment rate? ---U goes up and U rate goes up Know: If unemployment goes down, unemployment rate also goes down Know: If unemployment goes up, unemployment rate also goes up How to calculate: 2 Unemployment rate/ 2 unemployment= (u+e) 1- U(1)/ (U+E)^2 = E/((U+E)^2) = > 0 Ex.) Baby Boomer generation starts to retire…+ assume jobs not to replace Urate= U/U+E If E goes down, then everything goes up If the bottom # gets smaller, then the whole goes up Puts an upward pressure on unemployment Ex) Discouraged workers: someone who was unemployed, but they give up looking for jobs. (they are no longer a part of labor force) (LF=U+E Are discouraged workers measured in the unemployment rate? NOOOO BLS= under employment rate includes discouraged workers Natural rate of unemployment = avg. rate of unemployment Natural rate can never be 0 Bc people will always move from job to job No unemployment=bad

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Healthy to have some unemployment Two parts of unemployment!!! I. Frictional unemployment= people moving between jobs for whatever reason: A. Taste/preferences change B. Sectoral shifts in S+D for product—D^,P^,D^ Demand changes all the time for products Changes in supply Techno adv. It will have an effect on demand for labor Labor and capital work together But: Can also decrease demand for labor Robot replaces the person Changes in supply can cause frictional unemployment C. Unemployment insurance—get laid off you can get paid unemployment benefits Too much benefit can cause unemployment to be higher than the fric amount. If none= total chaos Some unemployment insurance is efficient, but too much is bad D. Temp agents (gov’t) Match workers to jobs plus training If it is earlier to find job fric. Unemployment goes down
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Test 2 - Test 2 Ch 15 Econ(unemployment chapter Things that...

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