Econ 102 Final Exam Review Guide

Econ 102 Final Exam Review Guide - Econ 102 Final Exam...

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Econ 102 Final Exam Review Guide Ch. 15: Unemployment Measured in three categories: o Employed : paid employees, self-employed, and unpaid workers in a family business o Unemployed : not working but have looked for work in the past 4 weeks o Not in the labor force : everyone else Unemployment rate : 100x(# of unemployed/labor force) o Typically, most unemployment spells are short (1/3 of unemployed have not had a job for under 5 weeks, 2/3 are under 14 weeks of unemployment) o Natural Rate : the normal rate at which the actual unemployment rate fluctuates from Frictional Unemployment: occurs when workers take their time to find work that best fits their skills and tastes (short-term for most workers) Structural Unemployment: occurs when there are more workers than jobs (usually more long-term) o Cyclical Unemployment : the deviation of unemployment from the natural rate (related with business-cycles) LFP rate : 100x (labor force/population) Problems with the U-rate: o Does not account for discouraged workers o Does not distinguish between full-time and part-time, and for part-time work occurring because of a lack of full-time jobs o Some people misreport their work status in the BLS survey Job Search : o Job search is the process of matching jobs with workers, where workers have different skills and tastes and jobs have different requirements o Sectoral shifts are changes in the composition in demand across an industry or a region of the country o The economy is always changing, so some frictional unemployment should be expected Unemployment Insurance : o Government program that aids peoples’ incomes when they become unemployed o Increases frictional unemployment because it reduces incentives for people to get a job because the benefits end once a job begins o Reduces uncertainty about future incomes and gives the unemployed more time to search, creating better job matches and higher productivity Structural Unemployment : o Occurs when there aren’t enough jobs, and often occurs when wage is kept above equilibrium; there are three reasons for this: Min. Wage Laws :
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The wage law may be set above equilibrium for the least skilled types of workers (only a small portion of the labor force in the U.S.) Unions : A worker association that bargains for workers with employers over wages, benefits, and working conditions The average union worker has a 20% higher wage and receives more benefits than a non-union worker of the same work level When unions raise the wage above equilibrium they drive Q of labor demand down and unemployment rises Insiders ”: workers who keep their job Outsiders ”: workers who lose their job. Some of them will go to non-unionized jobs which decrease unemployment and lower wages in those markets Critics: unions are cartels. They raise wages above equilibrium causing unemployment and/or depressing wages in non-union markets Advocates: unions counter the market power of large firms,
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