Macro Measures and Unemployment

These flashcards cover key terms and concepts related to macroeconomic measures, specifically focusing on unemployment.

Definition of unemployment (rate)

(% of) Workers that are actively looking for a job but aren’t working.

Who is included in the labor force?

Individuals at least 16 years old, able and willing to work, not institutionalized, not in military, full-time students, or retired.

What does the term 'Frictional Unemployment' refer to?

Temporary unemployment or being between jobs.

What is 'Structural Unemployment'?

Changes in the labor force make some skills obsolete, requiring workers to learn new skills.

What causes 'Cyclical Unemployment'?

Unemployment caused by a recession; demand for goods and services falls, leading to layoffs.

What is the Natural Rate of Unemployment (NRU)?

The amount of unemployment that exists when the economy is healthy and growing.

What does NAIRU stand for?

Non-Accelerating Inflation Rate of Unemployment.

What is considered full employment output (Y)?

The Real GDP created when there is no cyclical unemployment.

What is a discouraged worker?

Someone who is no longer looking for a job because they have given up.

How does the unemployment rate misrepresent the actual unemployment situation?

It ignores underemployed and discouraged workers, which can understate the unemployment level.

What do we mean by 'creative destruction'?

The permanent loss of jobs resulting from changes in technology and skills.

What impact does the economy's health have on the NRU?

The NRU remains generally unchanged in a healthy economy, despite fluctuations in the actual unemployment rate.

Difference between NRU (Natural Rate of Unemployment) and NAIRU (Non-Accelerating Inflation Rate of Unemployment)

NRU focuses on output and not having too much unemployment.

NAIRU focuses on inflation and not having too little unemployment.

A low unemployment rate that doesn’t cause higher prices (because too little unemployment = prices can rise because of increased consumer spending) is considered ____.

non-accelerating