Unemployment and Inflation Flashcards

Flashcards on Unemployment and Inflation based on Lecture 9.

Working-age population

The total number of civilians aged 15 years and over.

Not in the labor force

Includes those in school full-time, retired from work, and discouraged job seekers.

Unemployment Rate

The percentage of people in the labor force who are unemployed.

Labor Force

The number of people employed plus the number unemployed.

Labor Force Participation Rate

The percentage of the working-age population who are members of the labor force.

Marginal attached workers

Persons available for work but stopped looking due to repeated failure to find a job.

Discouraged worker

A person available for work but has stopped looking for a job because of repeated failure to find one.

Under-employed

Part-time workers who want full-time jobs.

Frictional unemployment

Unemployment due to normal job turnover; always exists.

Structural unemployment

Unemployment due to a mismatch of skills and available jobs.

Cyclical unemployment

Unemployment that fluctuates over the business cycle, increasing during recessions and decreasing during expansions.

Full employment (Natural Unemployment rate)

Occurs when the unemployment rate equals the natural unemployment rate, where cyclical unemployment is zero.

Natural unemployment rate

Frictional and structural unemployment.

Potential GDP

The value of real GDP when the economy is at full employment.

Output gap

Real GDP minus potential GDP, expressed as a percentage of potential GDP.

Consumer Price Index (CPI)

A measure of the average of the prices paid by urban consumers for a fixed market basket of consumer goods and services.

Inflation rate

The percentage change in the price level from one year to the next.

Deflation

A situation in which the inflation rate is negative.

Quality change bias

Bias in the CPI due to difficulty in measuring changes in the quality of goods.

Commodity substitution bias

Bias in the CPI when consumers substitute towards goods that have become relatively cheaper.

Outlet substitution bias

Bias in the CPI when consumers shift their patronage from one retail outlet to another.

New goods bias

Bias in the CPI arising from the failure to quickly include new goods in the market basket.

Nominal wages

The wage measured in current dollars.

Real wage

The wage measured in the dollars of a given reference base year.

Nominal interest rate

The dollar amount of interest expressed as a percentage of the amount loaned.

Real interest rate

The nominal interest rate adjusted to remove the effects of inflation.