Macro Exam 2 With Prof Kurt SSU

NAIRU

non-accelerating inflation rate of unemployment
the unemployment rate that occurs as a normal part of the functioning of the economy. Sometimes taken as the sum of frictional unemployment and structural unemployment rate

LFPR (Labor Force Participation Rate)

labor force/population

unemployment rate

unemployed/labor force

GDP Growth

(new-old)/old

GNP (Gross National Product)

includes what is produced domestically and what is produced by domestic labor and business abroad in a year

U-shape

economy recovers slowly
GDP does not recover to the forecast pre-shock level of GDP but the growth rate of GDP returns to pre-shock trend

V-shape

economy snaps back
GDP recovers and reaches the forecast pre-shock level of GDP

discouraged workers

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

U-6

Total unemployed, plus all persons marginally attached to the labor force, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

U-3

Total unemployed, as a percent of the civilian labor force (official unemployment rate)

not in the labor force

persons who are neither officially employed nor officially unemployed are not in the labor force. this category includes retired persons, students, those taking care of children or other family members, and others who are neither working nor seeking work

civilian non institutional population

persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g. penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces

civilian labor force

All persons in the civilian noninstitutional population classified as either employed or unemployed

population

labor force + not in labor force

labor force

employed + unemployed

real value

an economic statistic after it has been adjusted for inflation; contrast with nominal value

nominal value

the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value

L-shape

economy does not recover
GDP does not recover the pre-shock level of GDP nor does it return to the pre-shock trend growth rate

unemployed

A person 16 years old or older (1) who is not working, is available for work, and has made specific efforts to find work during the previous 4 weeks.

employed

Any person 16 years or older (1) who works for pay, either for someone else or in his or her own business for 1 or more hours per week, (2) who works without pay for 15 or more hours per week in a family enterprise, or (3) who has a job but has been temporarily absent with or without pay

cyclical

unemployment that is above frictional plus structural unemployment
caused by economic downturns
think layoffs
considered involuntary
sign if recession/depression

structural unemployment

the portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries
long term

marginally attached to the labor force

persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey

natural rate of unemployment

The unemployment rate that occurs as a normal part of the functioning of the economy. Sometimes taken as the sum of the frictional unemployment rate and the structural unemployment rate.

frictional unemployment

the portion of unemployment that is due to the normal turnover in the labor market; used to denote short-run job/skill-matching problems
normal
short-run

neoclassical economics

believes that the economy is self-regulating and always at full employment

aggregate supply curve

shows the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy

quality/new goods bias

inflation calculated using a fixed basket of goods over time tends to overstate the true rise in cost of living, because it does not take into account improvements in the quality of existing goods or the invention of new goods

basket of goods and services

a hypothetical group of different items, with specified quantities of each one meant to represent a "typical" set of consumer purchases, used as a basis for calculating how the price level changes over time

Aggregate Demand

The total quantity of goods and services that all sectors of an economy- households, businesses, government, and foreign buyers- are willing to purchase at different price levels during a specific time period
AD=C+I+G+(X-M)

distribution of income

the way in which total income is shared among individuals or groups within an economy. it shows how the income generated by the economy is divided across different segment of society, such as workers, capital owners, and the government

substitution bias

a distortion that occurs when measuring the cost of living or inflation, due to changes in consumer behavior in response to price changes (think CPI failing to account for buyers substituting products in their baskets)

government spending

the total number of money that the government allocates and spends on goods, services, and public programs within the economy
key component of aggregate demand

index number

a statistical measure that reflects the relative change in a particular variable over time, or between locations/sectors/categories. allows economists and analysts to track changes and make comparisons more easily by expressing the variable of interest as an index relative to a base period value

Consumer Price Index (CPI)

measures the cost of the market basket of a typical urban American family

disposable income

Income remaining for a person to spend or save after all taxes have been paid

investment

the action or process of investing money for profit or material result.

real interest rate

the interest rate adjusted for the effects of inflation

labor

the effort that people devote to a task for which they are paid

standard of living

the degree of wealth and material comfort available to a person or community.

Heterodox Economics

Economic schools of thought that are not mainstream

Aggregate Demand Curve

a curve that shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government

Say's Law

supply creates its own demand

compensation

something, typically money, awarded to someone as a recompense for loss, injury, or suffering.

base year

year serving as point of comparison for other years in a price index or other statistical measure

human capital

the knowledge and skills a worker gains through education and experience

inflation

a general increase in prices and fall in the purchasing value of money.

Keynes' Law

demand creates its own supply

physical capital

the human-made objects used to create other goods and services

price level

the average of all prices in the economy