If it’s in red it’s got to be in your head. If it’s in blue it may be required of you. Both red and black give it back If it’s in red it’s got to be in your head. If it’s in blue it may be required of you. Both red and black give it back

UNEMPLOYMENT Full employment - It is the level of employment reached when no cyclical unemployment exists. It means that nearly everyone who wants a job has a job.

TYPES OF UNEMPLOYMENT There are basically four types of unemployment. Cyclical unemployment is unemployment that rises during economic downturns and falls when the economy improves. –The one economist looks at the most. –It occurs when the demand for goods and services drops. –When the business cycle expands people are rehired.

Frictional Unemployment – occurs when people take time to find a job. –People leave jobs to find better jobs or conditions. –People need time to find jobs right after schooling or training.

Structural Unemployment – occurs when workers skills do not match the jobs that are available. There are five major causes of structural unemployment –The development of new technology. Fax machines & v. courier services. –The discovery of new resources. Sheetrock v. plaster Plastic v. steel –Changes in consumer demand. Cell phones v. land phones

Structural Unemployment – occurs when workers skills do not match the jobs that are available. There are five major causes of structural unemployment –Globalization Outsourcing of jobs –Lack of Education A WORD TO THE WISE!!! The average drop out makes approximately $ /year The average college degree 3 times the dropout amount. A.B.L. A.K.T. Learn the value of SELF HELP!

Seasonal Unemployment – occurs when industries slow or shut down for a season or make seasonal shifts in their production schedule. –Hiring more workers for Christmas –Sod farm workers in the summer –Government does not take steps to prevent seasonal unemployment because they expect it.

Measuring Unemployment The Unemployment rate is the percentage of the nation’s labor force that is unemployed. –Full employment - It is the level of employment reached when no cyclical unemployment exists. The Unemployment rate is between 4-6 percent. Full employment does not mean zero unemployment.

Measuring Unemployment The Unemployment rate is the percentage of the nation’s labor force that is unemployed. –Under employment – people are working at a job for which they are over qualified (more than qualified). Discouraged worker – people who have given up hope of finding work.

Inflation Inflation – a general increase in prices. How do you suppose firms determine when to increase prices? –Increase in human capital could cause an… –Increase in the price for human capital which could cause…. –Increase in variable costs which could cause an…. –Increase in products which could cause other workers to demand cost of living raises which could cause….

Inflation – a general increase in prices. Inflation rate –the percentage of change in price level over a period of time. Purchasing power – is the ability to purchase goods & services. –Purchasing power is affected by price. Price Index – a measurement that shows how the average price of a standard group of goods changes over time.

Consumer Price Index – a price index determined by measuring the price of a standard group of goods meant to represent the “market basket” of a typical urban consumer. Market basket – a representative collection of goods and services.

Types of Inflation – –Core inflation rate – the rate of inflation excluding the effects of energy prices. –Hyperinflation – inflation that is out of control. Causes of Inflation – –Quantity theory – too much money in the economy causes inflation. What law supports this theory? –Demand-Pull Theory – the demand for goods and services exceeds existing supplies. –Cost Push Theory – inflation occurs when producers raise prices in order to meet increased costs.

Types of Inflation – –Core inflation rate – the rate of inflation excluding the effects of energy prices. –Hyperinflation – inflation that is out of control. Causes of Inflation – –Quantity theory – too much money in the economy causes inflation. What law supports this theory? –Demand-Pull Theory – the demand for goods and services exceeds existing supplies. –Cost Push Theory – inflation occurs when producers raise prices in order to meet increased costs. Wage price spiral – rising wages cause higher prices & higher prices cause rising wages.

Effects of Inflation – –Purchasing Power – it erodes the dollar. –Income – inflation sometimes but not always erodes income. Fixed incomes – incomes that do not increase even when prices go up. –Interest rates – the interest on savings either keep match, exceed, or remain below the inflation rate. –Deflation – a sustained drop in price levels.