Labor Market and Saving Overview

These flashcards cover key vocabulary and concepts related to the labor market, saving, and economic principles as discussed in the lecture notes.

Marginal Product (MP)

The additional output generated by adding one more worker, calculated as (ΔTotal Output) / (Δ # of Workers).

Value of Marginal Product (VMP)

The additional revenue generated by employing one more worker.

Wages

The compensation paid to workers for their labor, which is inversely related to demand for labor; higher wages typically lead to lower employment.

Labor Supply Curve

A graphical representation showing the relationship between wages and the quantity of labor supplied, which typically slopes upward.

Reservation Wage

The lowest wage a worker is willing to accept for a job; influenced by opportunity costs.

Frictional Unemployment

Short-term unemployment occurring when workers are between jobs, often leading to more efficient job matching.

Structural Unemployment

Long-term unemployment due to skills mismatch or barriers preventing workers from finding jobs.

Cyclical Unemployment

Unemployment that increases during economic downturns or recessions.

Private Saving

The portion of household income that is saved rather than spent; includes both household and business savings.

National Saving

The total saving in an economy, which includes private savings and public savings.

Open-Market Operations

The buying and selling of government bonds by the Federal Reserve to control the money supply.

Velocity of Money (V)

A measure of the speed at which money is exchanged in transactions, calculated as (Nominal GDP) / (Money Stock).

Real Interest Rate

The nominal interest rate adjusted for inflation; represents the true cost of borrowing.

Saving Rate

The percentage of income that is saved rather than spent.

Capital Gain

An increase in the value of an asset, resulting in higher wealth.

Capital Loss

A decrease in the value of an asset, resulting in lower wealth.

Open-Market Sale

When the Federal Reserve sells government bonds, reducing bank reserves and money supply.

Savings Flow vs Stock

A flow value is defined per unit of time (e.g., monthly savings), while a stock value is defined at a point in time (e.g., total wealth).

Economic Growth

An increase in the production of goods and services in an economy, often measured by GDP.

Labor Market

An input market where firms buy labor from individuals, determining the price of labor (real wages) and quantity of employment.