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2. KRUGMAN’S
Economics
for AP®
S E C O N D E D I T I O N

3. Section 3
Module 12

4. What You Will Learn in this Module
Explain how unemployment is measured
Calculate the unemployment rate
Summarize the significance of the unemployment rate for the economy
Explain the relationship between the unemployment rate and economic growth
Section 3 | Module 12

5. Unemployment Rate
Employment is the number of people currently employed in the economy, either full time or part time.
Unemployment is the number of people who are actively looking for work but aren’t currently employed.
The labor force is equal to the sum of employment and unemployment.
Section 3 | Module 12

6. The U.S. Unemployment Rate, 1948-2013
Section 3 | Module 12

7. Unemployment Rate
The labor force participation rate is the percentage of the population aged 16 or older that is in the labor force.
The unemployment rate is the percentage of the total number of people in the labor force who are unemployed.
Section 3 | Module 12

8. The Significance of the Unemployment Rate
The unemployment rate can overstate the true level of unemployment while people who are easily employed look for the right job.
Section 3 | Module 12

9. The Significance of the Unemployment Rate
The unemployment rate can be understated by not including.
Discouraged workers are nonworking people who are capable of working but have given up looking for a job given the state of the job market.
Marginally attached workers would like to be employed and have looked for a job in the recent past but are not currently looking for work.
Underemployment is the number of people who work part time because they cannot find full-time jobs.
Section 3 | Module 12

10. Alternative Measures of Unemployment, 1994–2013
The Significance of the Unemployment Rate
Alternative Measures of Unemployment, 1994–2013
Section 3 | Module 12

11. Unemployment Rates of Different Groups, 2013
The Significance of the Unemployment Rate
Unemployment Rates of Different Groups, 2013
Section 3 | Module 12

12. Growth and Unemployment
During every recession in the last 30 years, the unemployment rate rose.
During periods of expansion, the unemployment rate usually falls, however, not always.
Section 3 | Module 12

13. Unemployment and Recessions, 1980-2013
Unemployment Rate
Unemployment and Recessions,
Section 3 | Module 12

14. Growth and Changes in Unemployment, 1949-2013
Unemployment Rate
Growth and Changes in Unemployment,
Section 3 | Module 12

15. F Y I
Failure to Launch
Section 3 | Module 12

16. Summary Employment is the number of people employed.
Unemployment is the number of people unemployed and actively looking for work.
The sum of employment and unemployment is equal to the labor force.
The labor force participation rate is the percentage of the population age 16 or older that is in the labor force.
The unemployment rate can overstate because it counts as unemployed those who are continuing to search for a job despite having been offered one.
The unemployment rate can understate because it ignores frustrated workers, such as discouraged workers, marginally attached workers, and the underemployed.
Section 3 | Module 12