unemployment - UNEMPLOYMENT Discussion Section 2.11.2011...

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UNEMPLOYMENT Discussion Section 2.11.2011
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UNEMPLOYMENT Discussion Section 2.11.2011
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The Long Run Solow Model – our model of long-run growth Given savings rate and depreciation rate, output per worker (y) was determined only by capital per worker (k), level of technology (T), and human capital per worker (h) So where is employment / unemployment in our model?
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Long Run to Short Run When we allow our society to underutilize resources (less than full employment) we can build models that explain short run fluctuations ( the business cycle) and the effects of both fiscal and monetary policy We must understand exactly what “unemployment” means in order to incorporate it into our models! (Not trivial)
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Long Run to Short Run
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Why? Unemployment is something that we as economists work very hard to eliminate (we also like to keep inflation low and increase real GDP) Effects of unemployment: Impacts macro growth Micro economics (at the family level) Psychological and health impacts
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This note was uploaded on 11/28/2011 for the course ECON 102 taught by Professor Rossana during the Winter '08 term at University of Michigan.

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unemployment - UNEMPLOYMENT Discussion Section 2.11.2011...

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