Econ unit 7

What is Frictional Unemployment?

Frictional unemployment refers to the short-term unemployment that occurs when individuals are temporarily between jobs or entering the workforce for the first time.

What is Structural Unemployment?

Structural unemployment occurs when there is a mismatch between the skills of the workforce and the skills needed for available jobs, often due to technological changes or shifts in the economy.

What is Cyclical Unemployment?

Cyclical unemployment refers to the unemployment that results from economic recessions or downturns, occurring when there is not enough demand for goods and services in the economy.

Unemployment

The percentage of the labor force that is actively seeking work but unable to find a job

Unemployment Rate

The percentage of the labor force that is unemployed and actively seeking work

Labor force

The total number of employed and unemployed individuals actively seeking work

Labor force participation rate

The percentage of the working age population that is either employed or actively seeking work

Marginally Attached/Discouraged Workers

Marginally attached workers are individuals who are not currently in the labor force but want to work and have looked for a job in the past year, while discouraged workers have given up actively seeking employment due to a belief that no jobs are available for them.

Natural rate of unemployment

The normal level of unemployment consisting of frictional and structural unemployment, but not cyclical

Shoe leather costs

The costs associated with increased transactions due to inflation, such as people making more trips to the bank

Menu costs

The costs incurred by firms when changing prices, such as updating menus or price tags

Unit off account costs

Costs that arise when inflation makes money a less reliable measure of value

Nominal interest rate

The stated interest rate on a loan or investment, not adjusted for inflation

Real interest rate

The nominal interest rate adjusted for inflation, representing the true cost of borrowing

Market Basket

A fixed collection of goods and services used to measure inflation and price changes

Consumer price index (CPI)

A measure of the overall price level for consumer goods and services

GDP deflator

A price index that adjusts nominal GFP for inflation to reflect real GDP

Final Domestic good value

The price of a finished product that is sold to the final consumer rather than intermediate goods used in production.

Expenditure Method (C+I+G+X)

The calculation of GDP by adding consumer spending (C), investment (I), government spending (G), and net exports (X).

Real GDP

GDP adjusted for inflation, measuring the true growth of an economy

Nominal GDP

GDP measured in current prices, not adjusted for inflation

GDP per Capita

Real GDP divided by the population, measuring the average income per person

Business cycle

The natural rise and fall of economic growth over time, including expansion, peak, contraction, and trough

Recession

A period of economic decline characterized by falling GDP and rising unemployment

Stagflation

A situation where inflation and unemployment rise simultaneously, usually due to supply shocks.