Unit 8: Unemployment and Inflation

Vocabulary flashcards covering the definitions, formulas, types, causes, and policy measures related to unemployment and inflation.

Unemployment

A situation in which people who want to work cannot find work at prevailing rates.

Labour force

The sum of all unemployed persons, full-time employed persons, and part-time employed persons.

Unemployment rate

The number of unemployed persons expressed as a percentage of the labour force, calculated as $\frac{\text{No. of unemployed persons}}{\text{Labour force}} \times 100$.

Discouraged workers

Individuals who have stopped looking for employment due to the lack of suitable positions available.

Labor force participation rate

The percentage of adults in an economy who are either employed or who are unemployed and looking for a job.

Underemployed

Individuals who are employed in a job that is below their skills.

Frictional unemployment

Short-term unemployment arising from the normal operation of the labour market, including job switchers, new entrants seeking a first job, and fired workers; also called search unemployment.

Cyclical unemployment

Unemployment that occurs when there is a temporary decrease in aggregate demand caused by a slump or recession in the economy; also referred to as demand deficient unemployment.

Structural unemployment

Normally long-term unemployment caused by structural changes in the economy or the way it is organised, such as skill mismatches, mechanization, or declining industries.

Natural unemployment rate

The sum of structural unemployment and frictional unemployment.

Seasonal unemployment

Unemployment caused by seasonal shifts in labour supply and demand, where certain businesses require workers for only part of the year.

Inflation

A sustained or continuous rise in the general price level that causes a persistent decrease in the purchasing power and real value of money.

Deflation

A fall in the general price level, typically signalling a decrease in aggregate demand for goods and services.

National Consumer Price Index (NCPI)

An index reflecting the cost of a representative basket of goods and services purchased by the typical household in Namibia, covering $259$ items ($220$ goods and $39$ services).

Base year

The benchmark year in which the survey of household expenditure is conducted and for which the index value is set to $100$.

Demand-pull inflation

Inflation that occurs when aggregate demand increases while aggregate supply remains constant, described as a situation where "too much money chases too few goods."

Cost-push inflation

Inflation caused primarily by an increase in production costs (such as wages, salaries, or imported inputs) that results in a decrease in aggregate supply.

Stagflation

An economic state caused by a decrease in aggregate supply that results in lower output, increased unemployment, and rising price levels.

Inflation targeting

A monetary policy framework designed to achieve price stability by keeping the average inflation rate within an established target band (such as between $3\%$ and $6\%$ per year in South Africa).