321LecNoteCh6

321LecNoteCh6 - Instructor : Kim, H.H. Spring 2011...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Instructor : Kim, H.H. Intermediate Macro Analysis Spring 2011 Economics 01:220:321 Chapter 6. Unemployment In this chapter, you will learn: …about the natural rate of unemployment: what it means what causes it understanding its behavior in the real world Natural rate of unemployment Natural rate of unemployment : The average rate of unemployment around which the economy fluctuates. In a recession, the actual unemployment rate ______________ the natural rate. In a boom, the actual unemployment rate ______________ the natural rate. Actual and natural rates of unemployment in the U.S., 1960-2009
Background image of page 1

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

View Full DocumentRight Arrow Icon
Spring 2011 Intermediate Macro Analysis 2 A first model of the natural rate Notation: L = # of workers in labor force E = ______________ U = ______________ U / L = ______________ Assumptions: 1. L is ______________ 2. During any given month, s = ____________________________ the fraction of employed workers that become separated from their jobs f = ____________________________, fraction of unemployed workers that find jobs s and f are ______________ The transitions between employment and unemployment The steady state condition Definition: the labor market is in _______________, or long-run equilibrium, if the unemployment rate is constant. The steady-state condition is: Employed Unemployed
Background image of page 2
Spring 2011 Intermediate Macro Analysis 3 Finding the “equilibrium” U rate f U = = = Solve for U / L : so, Example: Each month, 1% of employed workers lose their jobs ( s = 0.01) 19% of unemployed workers find jobs ( f = 0.19) Find the natural rate of unemployment: Policy implication A policy will _______________ the natural rate of unemployment only if it _______________ _______________. Why is there unemployment? If job finding were instantaneous ( f = 1), then all spells of unemployment would be brief, and the natural rate would be _________. There are two reasons why f < 1: 1. _______________
Background image of page 3

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

View Full DocumentRight Arrow Icon
Spring 2011 Intermediate Macro Analysis 4 2. _______________ Job search & frictional unemployment ______________________________ : caused by the time it takes workers to search for a job occurs even when wages are _______________ and there are _______________ to go around occurs because workers have different abilities, preferences jobs have ______________________________ ______________________________ of workers not instantaneous
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 12

321LecNoteCh6 - Instructor : Kim, H.H. Spring 2011...

This preview shows document pages 1 - 5. Sign up to view the full document.

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