1. Chapter 11 Economic Challenges

2. Section 1 Unemployment There are four types of unemployment.
Frictional
Structural
Seasonal
Cyclical
Measuring Unemployment
Full Employment

3. Frictional Unemployment
Frictional unemployment occurs when someone takes time to find a job.
Taking time off
Laid off
Between jobs

4. Seasonal Unemployment
Seasonal Unemployment occurs when one’s employment is based on factors like weather and climate.
Construction workers
Farm workers
fishermen

5. Structural Unemployment
Structural unemployment occurs when worker’s skills do not match jobs that are available.
There are 5 major causes of structural unemployment

6. 5 Major Causes of Structural Unemployment
The development of new technology
The discovery of new resources
Changes in consumer demand
Globalization
Lack of education

7. Cyclical Unemployment
Cyclical unemployment occurs when there are downturns and upswings in the economy.
A casualty of “bad economic times”
Economic measure of the economy

8. Full Employment
Generally full employment cannot exist. Economists agree that full employment can be considered as the condition when there is no cyclical employment.
4- 6 percent considered normal
Under the above circumstances the other types of employment still exist
Underemployment
Full employment is also referred to as the natural rate because in theory the number of job seekers equals the number of job vacancies

9. Measuring Unemployment
3 groups- under 16 or institutionalized
“not in the labor force”
16 and over willing and able to work
Part-time workers are counted as employed
Calculated by random survey of 60,000 households

10. Section 2 Inflation The effects of rising prices Price indexes
Causes of inflation
Effects of inflation

11. The effects of rising prices
Inflation- a general increase in prices
Purchasing power- the ability to purchase goods and services
CPI – consumer price index- a representative market basket of goods
Hyperinflation- inflation that is out of control

12. Inflation Formula
Take this year’s price index- last year’s index divide by last years index then x by 100 to express as a percentage.
2005 = 4.2
2006 = 3.4

13. Inflation by the numbers
Items costing
1962 =
(2005) = in 1962
1987 / = =

14. Causes of Inflation The Quantity Theory Demand –Pull Theory
Cost –Push Theory

15. The Quantity Theory
This theory is based on the amount of money that remains in circulation.
Increase the money supply while the economy is growing

16. Demand-Pull Theory
The Demand- Pull theory is based on the situation where demand for goods exceeds existing supplies.
A domino effect where prices rise when wages rise when production rises when demand rises.

17. Cost-Push theory
Cost-Push – occurs when producers raise prices in order to meet increased costs.
Higher prices for resources and or wages could cause this effect.
The spiraling effect is similar to the demand-pull effect. Higher prices led to higher costs, wages, e.t.c

18. Effects of Inflation
Purchasing Power- the largest most notable effect is on the purchasing power of your current income.
Income- if your income adjusts with the inflation rate you are lucky, if not you suffer from raising prices.
Interest Rates- The interest rates you receive on savings or pay on loans

19. Section 3 Poverty The Poor Causes of Poverty Income Distribution
Antipoverty Policies

20. The Poor
The poverty threshold- the income level below which income is insufficient to support a family or household
The level is currently $18,244.00
The poverty rate is the percentage of people who live in households below the poverty threshold

21. Causes of Poverty
Lack of Education- education is directly tied to earnings- HSDO- $18k, HSG 24k
CG $44k
Location- the region in which you reside has an effect on your poverty level.
Racial and Gender discrimination- whites generally earn more than minorities and men more than women

22. Continued
Economic Shifts- people who lack education and skills are not very productive workers. They also tend not to be very adaptive to new technologies and as a result they are usually the “first to go”
These workers also suffer when shifts occur from manufacturing to service and techno related jobs move in.
Shifts in family structure- more single parent families

23. Income distribution The median income is the US in 2001 was $ 42,200.
A measure of how the nation’s total income is distributed among its population

24. Reading
Chapter 21-3
Pages and

25. Any Questions