Ch 13 - Inflation and Unemployment

Frictional unemployment

people who are not working as they are in between jobs.

Unemployment

causes serious damage to individuals who are willing to work and are looking for work.

Inflation

can negatively affect families on a fixed income, however, most incomes tend to keep up with the rising costs of goods and services.

CPI

calculated does not overstate the amount of inflation since it does not account for all quality improvements.

Hidden discouraged unemployment

those who are able to work, but are not seeking employment as they are discouraged due to lack of jobs or lack of experience to secure a good enough job.

Lenders

tend to lose out on a percentage of money as the value of money changes than at the point it used to be.

The inflation rate

is that which indicates where the prices are rising.

Unemployment rate

is the number of unemployed people divided by the labor force.

The nominal interest rate

paid by banks on savings accounts is not adjusted upward for expected inflation.

Cyclical Unemployment

when employees lose their jobs during a recession and experience a slowdown in production.

Inflation

and Unemployment both have disastrous effects on our economy, which also affects our standard of living.

Unemployment

refers to the state of people who are able to work, willing to work, and actively looking for work, but cant find employment.

CPI

measures the average change over time in the prices paid by urban consumer for a market basket of goods and services.

Inflation

erodes the purchasing power of savings, meaning that any savings in a bank will have less value that before inflation

Unemployment

tends to increase during the contractionary phase of the business cycle.

Inflation

is the general increase of price and decrease in the purchasing value of money.

Inflation

is able to redistribute wealth as it takes purchasing power from households and transports it in the hands of others.

Menu Costs

The misallocation of resources because of inflation

Formula of CPI

Total cost this period/total cost base period \* 100

Formula of GDP Deflator

= (GDP/Real GDP)\*100

Natural Rate of Unemployment

the unemployment rate if there was no cyclical unemployment

Formula of Unemployment rate

Number of unemployed / Civilian Labour force

Hidden/discouraged unemployment

those who are able to work, but are not seeking employment as they are discouraged due to lack of jobs or lack of experience to secure a good enough job

Structural Unemployment

These people are out of work since the economy is structured in a way which is disadvantageous for them

Seasonal Unemployment

people who are able to find work only for a portion of the year due to the seasonal nature of their jobs

Cyclical Unemployment

when employees lose their jobs during a recession and experience a slowdown in production

Frictional unemployment

people who are not working as they are in between jobs