Unformatted text preview: abor market:
– excludes discouraged workers
– does not distinguish between full-time and
– Also, some people may misreport their work status in
the Current Population Survey (CPS). Total Population and Working Age
Population Unemployment and Participation in the 2000’s Why do we care about unemployment ?
• Negative effects on individuals
• Inefficient use of resources
• How low should unemployment be ? Short, Medium, Long - Run
• Short – run (say a few years): demand factors, e.g.
consumer confidence, lead to expansions and
• Medium – run (say 10 years): in the medium run,
output returns to a value determined by supply factors,
like the level of technology, the level of capital, the size
of the labor force.
• Long – run (say 50 years): to understand the growth
rate of output (thus of technology and capital) we look
at education level, institutions, saving rate, etc. What can we learn in this class?
• A theoretical framework to answer the following questions – What determines expansions/recessions ?
(Part I: The Short - Run)
– What is the relationship between inflation, output and
(Part II: The Medium-Run)
– What determines economic growth ?
(Part III: The Long-Run)
– What are the effects of different fiscal and monetary
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