2. Challenge #1 in America Unemployment

3.  To again monitor the health of our economy, economists measure the Unemployment Rate.  Each month, they survey certain Americans to find out their employment status.  The U.S. Government defines “employed” as people 16 and older meeting one or more of the following criteria.

4. 1.Working for pay or profit for 1 or more hours this week. 2.Working without pay in a family business 15 or more hours. 3.Having a job, but being ABSENT due to illness, weather, vacation, etc.

5. 1. NOT meeting any of the criteria above AND 2.ACTIVELY looking for work during the past 4 weeks. The most closely watched and highly publicized labor force statistic is the UNEMPLOYMENT RATE=the percentage of people in the civilian labor force who are UNEMPLOYED.

6. Measuring Unemployment - 1994 Employed Not in laborforce Under 16 and institutionalized Total Population 267,901,000 Total Population 267,901,000 Laborforce136,297,000 64,767,000 66,837,000 Unemployed 6,739,000 129,558,000

7. Unemploymentrateunemployed labor force x 100 = Measuring Unemployment

8.  Structural  Cyclical  Frictional  Seasonal

9.  Unemployment that occurs as a result of changes in technology, consumer preferences, or in the way the economy is “STRUCTURED.”  EX: Many TV repairmen had to find new work as televisions are now built with transistors instead of tubes.

10.  This unemployment results from contractions in the economy.  This type of unemployment HARMS the economy more than any other types of unemployment.  During the Great Depression, the unemployment rate reached an all time high of about 25%.  As recently as 2009 and 2010, the unemployment rate reached 10.2%.

11.  People who have decided to leave one job and LOOK for another typically better job.  Also, new entrants and re-entrants into the LABOR FORCE.  Economists consider frictional unemployment as a NORMAL part of a healthy and changing ECONOMY.

12.  This predictable unemployment fluctuates as a result of HOLIDAYS, school breaks, and industry PRODUCTION schedules.

13. An increase in the average price level of all products in an economy Inflation

14.  As prices increase, the amount that a dollar buys decreases.  Inflation reduces the real purchasing power of the dollar.  Real GDP removes inflation.

15.  Inflation that occurs when demand for goods and services exceeds existing supplies  Heavy demand make items more valuable, forcing prices up.

16.  Decrease in purchasing power  Erodes fixed income  Interest Rates  Savings Investments lose value  Loaners lose profit

17.  Occurs when producers raise prices in order to meet increased costs  Factors of production increase (commonly labor) which forces prices to rise.

18.  A decrease in the average price level of all goods and services in an economy.  The most prolonged and most recent deflationary period in the U.S. occurred during the Great Depression, when the unemployment rate was high and wages were low

19.  How do they measure prices of all goods?  How do they know that prices are going up or down?

20. A price index is a number that tells us how much prices have changed (%) since a base year

21. If the 1998 price index is 128, and the base year is 1992, then prices have increased 28% between 1992 and 1998 1998 Index = 128 1992 Index = 100 Price increase= 28 General price rises are called INFLATION

22.  Economists use the Consumer Price Index or the CPI to measure the average change over time in the price of a fixed group of products.  To measure the CPI, the Bureau of Labor Statistics first chooses a base year against which to measure price changes.

23.  Second, they select a representative sample of commonly purchased consumer items, called the market basket. They then set that base year to 100, so that other years can be compared to it easily.

24.  To calculate the CPI, take the price of this year’s cost of the market basket.  Divide it by the cost of the basket in the base year.  Multiply the result by 100.  This year’s cost / base year’s cost x 100  For ex. Use the formula to determine the CPI if the year’s cost is $7000 and the base year’s cost was $4000.

25.  This year’s cost= $7000  Divided by base year’s cost($4000) = 1.75  1.75 x 100 = 175  See the Inflation Rates for 1970-2004 on page 341.

28. Used to compare different national economies on a per person basis. GDP Population

29.  The poverty rate: the percentage of individuals or families in the total population that are living below the poverty threshold  Poverty threshold: the lowest income as determined by the government that a family or household of a certain size needs to maintain a basic standard of living.

30.  In 2007, the poverty threshold for a family of four was…….  $21,027