Unemployment -

Unemployment -

  • Unemployment - failure to use available resources, particularly labor to produce desire goods and services
  • Population - the total amount of people in a country
  • Labor force - total number of people in a country that is employed or unemployed
  • Employed -
    • people who are 16 years of age or older who have a job
    • work at least 1 hour every 2 weeks
  • Unemployed - 
    • people who are 16 years of age or older that do not have a job but are actively searching for a job within the last 2 weeks
  • Not in the Labor Force -
    • kids, full-time students, retirees, disabled people, homemakers (mothers, stay at home), mentally institutionalized, incarcerated, military , discouraged workers
  • Types of Unemployment - 
    • Frictional Unemployment - 
      • temporarily unemployed or in-between jobs
      • workers are qualified and have transferable skills
      • high school or college graduates
      • people who are looking for better opportunities 
    • Seasonal Unemployment - 
      • due to the time of the year and the nature of the job
      • life guards, construction workers, mall Santa Clause, Easter bunnies, school bus drivers
    • Structural Unemployment - 
      • changes in the structure of the labor force which makes some skills obsolete
      • workers do not have transferable skills 
      • VCR repairmen, typewriters repairmen
      • creative destruction - new jobs are created, old jobs are destroyed
    • Cyclical Unemployment -
      • unemployment that results in economic downturns with recessions
      • as demand for goods and services fall, demand for labor falls and workers will be laid off
  • Unemployment Rate - 
    • (Number of Unemployed / Total Labor Force) * 100
    • Total Labor Force: (# of Unemployed) + (# of Employed)
  • Full Employment or NRU - Natural Rate of Unemployment (4-5%)
    • frictional +  structural unemployment = NRU
    • no cyclical employment allowed
  • Okun's Law - for every 1% in which the actual unemployment rate exceeds the natural rate of unemployment, it causes a 2% decline in real GDP
    • (Actual Unemployment Rate - Natural Rate of Unemployment) x 2 = % decline in real GDP
  • Rule of 70 - calculates the number of years that is required to double GDP
    • 70 / x , x is expressed as a percentage but the answer won't be a percentage
    • Ex. the inflation rate is 2%, how long will it take for GDP to double?
      • 70 / 2 = 35 years

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