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Unformatted text preview: 1 Unemployment and Wages Measuring unemployment and the unemployment rate Structural, frictional and cyclical unemployment Discouraged workers and hidden unemployment Policy Natural Rate of unemployment Nominal and real wages and productivity 1 International Comparisons ( unemployment blues , the unemp game show) Macroeconomic Unemployment Policies - Should they be Used? Keynesian Demand Management Policies Unstable economy Counter cyclical unemployment monetary/fiscal policy Unstable economy stuck below full employmen 2 Unstable economy, stuck below full employment Classical/Monetarist In the long-run economy will settle at equilibrium at natural (full) rate of unemployment (NAIRU) Stabilization policy unnecessary and ineffective (lags, rational expectations) Reduce structural and frictional causes: minimum wages, training, etc Government policies are the problem, not the solution Minimum wage laws, regulations, etc News? 3 2 4 Harm of Unemployment - "central social concerns of modern capitalism" Wasted resources loss of output/income/ wealth great depression - $2.1 trillion (1984 dollars) decay of human capital 5 Social problems crime, illness, etc Can threaten very existence of capitalist economic system...
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