Unemployment notes

Unemployment notes - purchases Make domestically produced...

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Describing unemployment Full employment The level of employment that results when the rate of unemployment is normal, considering both frictional and structural factors Closely related to the idea of the natural rate of unemployment Natural rate of unemployment The level of unemployment that reflects “job shopping” in an economy of imperfect information and dynamic change The Macroeconomy Aggregate demand (AD) curve Indicates the various quantities of goods and services that people are willing to buy at different price levels Slopes downward to the right Inverse relationship between amount of goods and services demanded and the price level A lower price level will: Increase the purchasing power of a fixed quantity of money Reduce the demand for money and lower the real interest rate, stimulating additional
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Unformatted text preview: purchases Make domestically produced goods less expensive relative to foreign goods (ceteris paribus) Equilibrium in the short run Short-run equilibrium is present in the goods Equilibrium in the long run Decision makers agree to long-term contracts influencing current prices and costs Requires that these decision makers correctly anticipated the current price level Disequilibrium Adjustments that occur when output differs from long-run potential And unexpected change in the price level will alter the rate of output in the short run Increase will improve profit margins Decline will reduce profitability DO WE EVER REACH LONG-RUN EQUILIBRIUM?...
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