Macroecon Exam 1- Unemployment/inflation

Employed

Has a job

Unemployed

No job, available to work, actively looking

Labor force

Employed + unemployed

Not in labor force

Not working and not actively working

Discouraged worker

Stopped looking; not counted in labor force

Frictional unemployment

Between jobs / searching

Structural unemployment

Skills do not match available jobs

Cyclical unemployment

Caused by recession

Natural rate of unemployment

Frictional + structural unemployment; unemployment when the economy is at full employment

Full employment

No cyclical unemployment

Underemployment

Working less than desired or below skill level

Unemployment rate

Percent of labor force unemployed

Labor force participation rate

Percent of adult population in labor force

CPI

Tracks price changes for a typical consumer basket

Inflation

Price rising

Deflation

Prices falling

Menu costs

Cost of changing prices

Shoe-leather costs

Extra time and effort spent managing money because of inflation

Producer Price Index

Measures prices received by producers

Nominal value

Value measured in current dollars

Real value

Value adjusted for inflation

Nominal interest rate

Stated interest rate

Real interest rate

Interest rate adjusted for inflation

Problem with CPI

Can have outlet bias, new product bias, and quality change bias