Exam3 study guide - Exam #3 Study Guide Chapter 10:...

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Exam #3 Study Guide Chapter 10: Unemployment Summary Labor force = # employed + # unemployed Unemployment rate = (# of unemployed / labor force) x 100 Labor-force participation rate= ( labor force/adult population) x 100 The unemployment rate is the percentage of those who would like to work who do not have jobs. The bureau of Labor Statistics calculates this statistic monthly based on a survey of thousands of households. The unemployment rate is an imperfect measure of joblessness. Some people who call themselves unemployed may actually not want to work and some people who would like to work have left the labor force after an unsuccessful search and therefore are not counted as unemployed. In the U.S. economy, most people who become unemployed find work within a short period of time. Nonetheless, most unemployment observed at any given time is attributable to the few people who are unemployed for long periods of time. One reason for unemployment is the time it takes workers to search for jobs that best suit their tastes and skills. This frictional unemployment is increased as a result of unemployment insurance, a government policy designed to protect workers’ incomes. A second reason our economy always has some unemployment is minimum-wage laws. By raising the wage of unskilled and inexperienced workers above the equilibrium level, minimum wage laws raise the quantity of labor supplied and reduce the quantity demanded. The resulting surplus of labor represents unemployment. A third reason for unemployment is the market power of unions. When unions push the wages in unionized industries above the equilibrium level, the create a surplus of labor. A fourth reason for unemployment is suggested by the theory of efficiency wages. According to this theory, firms find it profitable to pay wages above the equilibrium level. High wages can improve worker health, lower worker turnover, raise worker quality, and increase worker effort. collective bargaining the process by which unions and firms agree on the terms of employment cyclical unemployment the deviation of unemployment from its natural rate discouraged workers individuals who would like to work but have given up looking for a job efficiency wages above-equilibrium wages paid by firms to increase worker productivity frictional unemployment unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills job search the process by which workers find appropriate jobs given their tastes and skills labor force the total number of workers, including both the employed and the unemployed labor-force participation rate the percentage of the adult population that is in the labor force natural rate of unemployment the normal rate of unemployment around which the unemployment rate fluctuates strike the organized withdrawal of labor from a firm by a union
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structural unemployment unemployment that results because the number of jobs available in some
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This note was uploaded on 11/17/2011 for the course EC 202 taught by Professor Obst during the Spring '08 term at Michigan State University.

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Exam3 study guide - Exam #3 Study Guide Chapter 10:...

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