Machinery replace workers causing unemployment ex

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machinery replace workers causing unemployment (ex: auto assemblers fired as robots take over production) Cyclical Unemployment unemployment that results from economic downturns (recessions) as demand for goods and services falls, demand for labor falls and workers are fired Ex: steel workers laid off during recession; restaurant owners fire waiters after months of poor sales due to recession The Natural Rate of Unemployment Two of the three types of unemployment are unavoidable FRICTIONAL AND STRUCTURAL UNEMPLOYMENT Together they make up the NATUAL RATE OF UNEMPLOYMENT (NRU) We are at full employment if we have only the natural rate of unemployment This is the normal amount of unemployment that we SHOULD have The number jobs seekers equals the number of job vacancies Full employment means NO CYCLIC UNEMPLOYMENT Economists generally agree that a unemployment rate of around 4-6% is full employment 4-6% unemployment = NRU OKUN’s LAW : when unemployment rises 1 percent above the natural rate, GDP falls by about 2 percent What is Wrong with Unemployment Rates? It can misdiagnose the actual unemployment rate because of the following: Discourage Job Seekers : some people are no longer looking for a job because they have given up Part Time Workers : someone who wants more shifts but can’t get them is still considered employed Race/Age Inequalities : Hispanics- 5,o.8% for Jan. African Americans- 8.9% for Jan. Teenagers- 15.3% for January Illegal Labor : many people work under the table
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