Chapter 13: Economic Challenges

Frictional Unemployment

occurs when people change jobs, get laid off, take time to find the right job, or take time off

Seasonal Unemployment

Industries slow or shut down for a season or make seasonal shifts in their production schedules

Structural Unemployment

Occurs when workers’ skills do not match the jobs that are available. Technological advances are one cause

Cyclical Unemployment

BAD - rises during economic downturns and falls when the economy improves

Full Employment

The level of employment reached when there is no cyclical unemployment

underemployed

working a job for which they are overqualified or working part-time when they desire full-time work

discouraged workers

people who want a job but have given up looking for one

Demand Pull Inflation

Inflation occurs when demand for goods and services exceeds existing supplies

Inflation

A general increase in prices

Purchasing Power

The ability to purchase goods and services, is decreased by rising prices

Price Level

The relative cost of goods and services in the entire economy at a given point in time

Wage Price Spiral

caused by cost push inflation - the process by which rising wages cause higher prices, and higher prices cause higher wages

Cost Push Inflation

inflation occurs when producers raise prices in order to meet increased costs

Natural Rate of Unemployment

4%-6%

Frictional Unemployment in the Business Cycle

all phases

Demand Pull Inflation in the Business Cycle

expansion peak

Cost Push Inflation in the Business Cycle

all phases