A. Policy Goal: Full Employment 1) Definition- 0 cyclical unemployment; there will still be people unemployed but not for cyclical reasons; this is a labor market which is in equilibrium a) it is not possible to have a 0% rate of unemployment because there will always be jobs created and people entering the labor market; there will always be frictional unemployment b) There will always be structural unemployment c) It is not desirable, frictional results in better, more productive jobs B. Inflation and Inflation Rates 1) Definitions- inflation-a continuous increase in the aggregate price level (price stability- inflation rates that are kept at low and steady levels); inflation rates- a percent change in the aggregate price level from one period of time to the next 2) Measurements: Fixed basket of goods and services a) Consumer Price Index (CPI)- retail; as PCI goes up the CPI might go up as the prices trickle down b) Producer Price Index (PPI)- sum of overall prices of goods and services for businesses
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This note was uploaded on 05/09/2011 for the course ECON 2000 taught by Professor Roussell during the Spring '06 term at LSU.