question
labor force
answer
part of population over 16, not in military, not institutionalized, and have not chosen to op out of work force
question
two components of labor force
answer
people who are working, and those looking for work without a job
question
unemployed
answer
not working, but seeking work
question
unemployment rate
answer
[(# of unemployed)/(# in the labor force)] *100
question
frictional unemployment
answer
unemployment due to the natural frictions of the economy (represented by qualified individuals with transferable skills who change jobs) (job search services etc)
question
structural unemployment
answer
unemployment due to structural changes in the economy that eliminates some jobs and creates others for which the unemployed are unqualified (training, education, etc)
question
seasonal unemployment
answer
unemployment due to seasonal trends
question
cyclical unemployment
answer
unemployment due to contractions in the economy (stabilization (monetary/fiscal) policies)
question
low unemployment goal
answer
natural rate of unemployment only causes by frictional and structural factors
question
full employment
answer
exists when the unemployment rate is equal to the natural unemployment rate
question
percentage in labor force formula
answer
[(# of people in the labor force)/(total adult population)]*100
question
percentage out of the labor force
answer
[(# of people out of labor force)/(total adult population]*100
question
underemployed
answer
This includes those that are trained or skilled for one type or level of work who are working in a lower paying job or one that does not utilize their skills
question
Discouraged workers
answer
those who have stopped looking for employment and, hence, are no longer counted in the unemployed also fall into this group
question
labor force participation rate
answer
This is the percentage of adults in an economy who are
either employed or who are unemployed and looking for a job
either employed or who are unemployed and looking for a job
question
implicit contract
answer
which is that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the business is strong
question
Efficiency wage theory
answer
argues that the productivity of workers depends on their pay, and so employers will often find it
worthwhile to pay their employees somewhat more than market conditions might dictate
worthwhile to pay their employees somewhat more than market conditions might dictate
question
adverse selection of wage cuts
answer
argument points out that if an employer reacts to poor business conditions by reducing wages for all workers, then the best workers, those with the best employment alternatives at other firms, are the most likely to leave
question
insider-outsider model of the labor force
answer
in simple terms, argues that those already working for firms are "insiders," while new employees, at least for a time, are "outsiders."
question
relative wage coordination argument
answer
points out that even if most workers were hypothetically willing to see a decline in their own wages in bad economic times as long as everyone else also experiences such a decline, there is no obvious way for a decentralized economy to implement such a plan
question
Okun's law
answer
described the consistent relationship between changes in output and changes in unemployment that has become a standard tool for monetary policymakers and forecasters
question
Okun's law continued
answer
2% drop in inflation-adjusted GDP growth relative to trend is associated with about a 1 percentage point increase in the unemployment rate
question
Okun's law change in unemployment rate
answer
-½ (Actual GDP growth - 3%)
question
to keep unemployment rate from increasing, actual gdp must grow at
answer
3% a year
question
to lower unemployment by 1% actual gdp must grow by
answer
5%
question
Real W
answer
Nominal W/P
question
What determines output in the classical model?
answer
Amount of capital, labor and resources
question
what determines unemployment?
answer
Frictional and structural, NO cyclical
question
what causes inflation?
answer
Too rapid growth in the money supply
question
what are the determinants of real interest rates?
answer
Supply and Demand for loan-able funds
(Savings and Investment)
(Savings and Investment)
question
what determines saving and consumption?
answer
Real interest rates (since savings=f(real interest rate) and C=Y-S)
question
what determines investment?
answer
Real interest rates; loanable funds model
question
How does fiscal policy work?
answer
It doesn't - no need for it since economy is 'self-adjusting'
in the long-run and always tends towards full employment and ineffective because an
increase in G (or reduction in T) completely crowds out investment - only impact is to
slow growth
in the long-run and always tends towards full employment and ineffective because an
increase in G (or reduction in T) completely crowds out investment - only impact is to
slow growth
question
How does monetary policy work?
answer
Ms-> D->P i.e. only affects the price level and
nominal (non-real) variables. Alternatively MV=PY so with Y at full employment and V constant for institutional reasons M->P ONLY
nominal (non-real) variables. Alternatively MV=PY so with Y at full employment and V constant for institutional reasons M->P ONLY
question
How does money "matter' (affect the economy) in the long-run?
answer
Ms->P ONLY - classical dichotomy
question
How does the Fed matter?
answer
In the LR, primary focus on controlling inflation
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
