Ch14 SH - The Labor Market In the Macroeconomy The Labor...

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1 The Labor Market: Basic Concepts The Classical View of the Labor Market The Classical Labor Market and the Aggregate Supply Curve The Unemployment Rate and the Classical View Explaining the Existence of Unemployment Sticky Wages Efficiency Wage Theory Imperfect Information Minimum Wage Laws The Short-Run Relationship Between the Unemployment Rate and Inflation The Phillips Curve: A Historical Perspective Aggregate Supply and Aggregate Demand Analysis and the Phillips Curve Expectations and the Phillips Curve Is There a Short-Run Trade-Off between Inflation and Unemployment? The Long-Run Aggregate Supply Curve, Potential Output, and the Natural Rate of Unemployment The Non-accelerating Inflation Rate of Unemployment (NAIRU) The Labor Market In the Macroeconomy
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2 The Labor Market: Basic Concepts The labor force ( LF ) is the number of employed plus unemployed: LF = E + U Unemployment rate    The number of people  unemployed as a percentage of the labor force.  Unemployment rate =  U/LF
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3 Frictional unemployment The portion of unemployment that is due to the normal working of the labor market; used to denote short-run job/skill matching problems. Structural unemployment   The portion of unemployment  that is due to changes in the structure of the economy that  result in a significant loss of jobs in certain industries. Cyclical unemployment   The increase in unemployment that  occurs during recessions and depressions. The Labor Market: Basic Concepts
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4 The Classical View of the Labor Market Labor demand curve A graph that illustrates the amount of labor that firms want to employ at each given wage rate. Labor supply curve   A graph that illustrates the  amount of labor that households want to supply at   each given wage rate.
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The Classical View of the Labor Market Classical economists believe that the labor market always clears. If the demand for labor shifts from D 0 to D 1 , the equilibrium wage will fall from W 0 to W 1 . Anyone who wants a job at W 1 will have one.  FIGURE 14.1
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Ch14 SH - The Labor Market In the Macroeconomy The Labor...

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