1. Unemployment One way the economists measure the health of the economy Four basic kinds of unemployment -frictional -seasonal -structural -cyclical

3. Frictional Unemployment Unemployment that occurs when people take time to find job Examples: people changing jobs, laid off and looking for more work, need time to find the right job, right after they finish schooling

4. Seasonal Unemployment Unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season Examples: school schedules, farmers, ski workers, migrant workers

5. Structural Unemployment Unemployment that occurs when workers skills do not match the jobs that are available Five main causes 1. Development of new tech – vhs manufacture companies 2. Discovery of new resources – solar vs electric industries 3. Consumer demand – Rc Cola 4. Globalization – Out sourcing 5. Lack of Education – dropouts are less likely to keep jobs than others

6. Cyclical Unemployment Unemployment that rises during economic downturns and falls when the economy improves –During recessions demand for goods and services drop forcing production to slow and demand for labor slows also and demand for labor slows also -People laid off because of recession and when economy improves, will be rehired

7. Full Employment The level of unemployment reached when there is no cyclical unemployment - everybody who wants a job has one - everybody who wants a job has one In a market economy (ours) there will never be 0 unemployment, 4-6% always Underemployment – working at a job when your overqualified, or working part- time when you want to work full-time

8. Inflation General increase in prices Purchasing power – is the ability to purchase goods and services As prices rise the purchasing power of money declines

9. Price Indexes: A way to measure inflation Economists compare price levels or cost of goods and services for entire country at given point in time Price Index – a measurement that shows how the average price of a standard group of goods changes overtime The best know is the Consumer Price Index – a price index to measuring the price of a standard group of goods meant to represent the “market basket” – representation of a group of goods – of a typical urban consumer Every 10 years market basket is updated

11. Causes of Inflation Quantity theory – too much money in the economy causes inflation - monitor the money supply - monitor the money supply Demand-pull theory – inflation occurs when demands of goods and services exceeds supply, making those items more valuable Cost-Push theory – producers raise prices in order to meet increased costs, ex. Oil - wage-price spiral – the process by which raising wages cause higher prices, and higher prices cause higher wages - wage-price spiral – the process by which raising wages cause higher prices, and higher prices cause higher wages

12. Effects of Inflation Purchasing power decreases – if the inflation rate is 10 percent this year, 100$ to buy goods last year can only by 90$ worth of goods this year Income – If wages do not increase to offset inflation, they earn less - Fixed income – income that does not go up even when prices go up - Fixed income – income that does not go up even when prices go up Interest Rate – If interest rates do not match inflation rate, savers lose value in their money Deflation – a sustained drop in price levels