macroeconomics quiz 3

• natural rate of unemployment - the long term rate of unemployment
• full employment - when virtually all who are able and willing to work are employed
• discouraged worker - someone who is unemployed for a long period of time and stops looking for work
• jobless DOES NOT EQUAL unemployed
• people who are not a part of the labor force - People under the age of 16, Persons in prison or the military, Persons not looking for work but old enough to
• Structural Unemployment - Someone who has certain skills and is a hard worker but the jobs available require other skills
• Frictional Unemployment - The time someone is unemployed while they transition to a new position at a different company or when their new job hasn't started yet
• Structural Unemployment - Someone who wants to work but doesn't live where jobs are located and is unable to move there.
• money illusion - When someone uses nominal dollars rather than real dollars to estimate their current wealth
• Price Stability - when the average price level doesn't go up or down too quickly in an economy
• Average prices increase AND decrease in an economy.
• Increased spending directly causes an increase in amount of inflation within an economy
• the core inflation excludes price of energy and food in its calculation
• People with debt benefit from unpredicted inflation, ceteris paribus
• People or businesses earning commission or with other variable incomes are most likely to be harmed by deflation, ceteris paribus
• components of a country's Aggregate Demand - Investment Spending, Government Spending, Consumption Spending, Net Exports
• Full-employment GDP - the value of total market output (stuff being made in the economy) that corresponds with price stability in the economy
• If an economy isn't producing enough to be at the full-employment rate of output (x-axis), we have higher unemployment because we don't need as much labor when we produce less stuff
• The business cycle - alternating periods of economic growth and contraction
• The level of long-run aggregate supply is equal to the full-employment rate of output in an economy.
• The aggregate supply and demand model can help us model inflation in an economy
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