Economic Unemployment and Monetary Policy Terms

A set of vocabulary flashcards covering important concepts related to unemployment types, monetary policy, and economic indicators.

Frictional Unemployment

Short-term unemployment when people are between jobs or looking for new ones (normal/healthy).

Structural Unemployment

Long-term unemployment caused by mismatch between worker skills and job requirements (often due to tech changes).

Cyclical Unemployment

Unemployment caused by recessions and low demand in the economy.

Seasonal Unemployment

Unemployment that happens during certain times of the year (e.g., agriculture, tourism).

Marginally Attached Workers

People who want a job, are available, looked in last 12 months, but NOT in last 4 weeks.

Open Market Sale (Contractionary)

Fed sells bonds leading to banks losing reserves and a decrease in the money supply.

Open Market Purchase (Expansionary)

Fed buys bonds leading to banks gaining reserves and an increase in the money supply.

Inflation Formula

Inflation rate = nominal interest rate − real interest rate.

Foreign Direct Investment (FDI)

Foreign company owns and runs a business.

Foreign Portfolio Investment (FPI)

Foreign investor buys part of a company but doesn’t control it.

Efficiency Wage

Paying workers above equilibrium wage to increase productivity.

M1

Currency + checking accounts + some savings balances.

M2

M1 + small time deposits + money market funds.

Credit Crunch

Banks have less capital leading to less lending.

100% Reserve Banking Effect

Deposits don’t change money supply, only shift currency to deposits.