Ib: macroeconomic objectives SL

Unemployment

The number of people of working age who are actively seeking work but are without jobs.

Labour force

The total number of people in a country who are either employed or actively seeking employment.

Unemployment rate

The number of unemployed people expressed as a percentage of the labour force.

Full employment

When everyone who is willing and able to work at existing wage rates has a job; only natural unemployment (frictional + structural + seasonal) exists.

Underemployment

When workers are employed part-time or in jobs that do not make full use of their skills and abilities.

Natural rate of unemployment

The unemployment that exists when the economy is producing at its full-employment level of output (potential GDP); includes frictional, structural, and seasonal unemployment.

Cyclical (demand-deficient) unemployment

Unemployment arising from a downturn in aggregate demand; associated with recessions in the business cycle.

Structural unemployment

Unemployment arising from changes in the structure of the economy that cause a mismatch between workers’ skills and available jobs (e.g. automation or de-industrialisation).

Frictional unemployment

Unemployment that occurs when people are between jobs or are searching for their first job.

Seasonal unemployment

Unemployment that occurs at certain times of the year when demand for labour is lower, e.g. in tourism or agriculture.

Inflation

A sustained increase in the general (average) price level of goods and services in an economy over time.

Deflation

A sustained decrease in the average price level of goods and services in an economy over time.

Disinflation

A fall in the rate of inflation; prices are rising but at a slower rate.

Price stability

A situation in which the average price level in an economy changes only slowly over time.

Consumer Price Index (CPI)

A measure of the cost of living for the typical household; compares the cost of a fixed basket of goods and services between one period and another.

Producer Price Index (PPI)

A measure of the change in the prices of goods and services bought and sold by producers; may indicate future inflation.

Demand-pull inflation

Inflation caused by an increase in aggregate demand in an economy.

Cost-push inflation

Inflation caused by a rise in costs of production, shifting short-run aggregate supply to the left.

Hyperinflation

Extremely rapid and uncontrolled increases in the average price level, often exceeding 50 % per month.

Economic growth

An increase in real GDP over time; an increase in a country’s actual or potential output.

Actual growth

Growth that occurs when real output increases through greater or better use of existing resources; shown by a movement from inside the PPC to a point nearer the curve.

Potential growth

An increase in an economy’s capacity to produce, represented by an outward shift of the PPC.

Sustainable growth

Growth that meets the needs of the present without compromising the ability of future generations to meet their own needs.

GDP growth rate

The percentage change in real GDP over a period of time.

Output gap

The difference between actual output and potential output in an economy.