Econ 110 chapters:15,16,

is the sum of the employed and the unemployed:

    Labor= employed + unemployed

The normal rate of unemployment around which the unemployment rate fluctuates.

Individuals who would like to work but have given up looking for a job.  These workers do not show up on the unemployment statistics.

Short term:  Unemployment would not be considered a serious problem :  this means that a worker would only have a few weeks to find another job that suits their particular needs.

                Long Term Unemployment:  Could be considered a serious problem.  The unemployed would suffer economic and psychological hardships.

Economists believe that most unemployment is short term and that most unemployment at any given time is long term.

unemployment that results because it takes time for workers to search for new hobs that best suit their tastes and skills:  This is unavoidable because the economy is always changing. 

Results because of jobs available in some labor markets is insufficient to provide a job for everyone who wants to work.

A government program that partially protects workers income when they become unemployed.

A worker association that bargains with employers over wages, benefits and working conditions.  When a company has a union, not all workers are part of that union.  When the wages are raised because of union strikers, then the union workers get more pay and those who were not part of that union are kicked out, so that the firm can pay the higher wages to the union workers.  Now there are more jobs that need to be filled and less people available to fill those positions.

The process by which unions and form and firms agree on the terms of employment

No real answer:

Two sides to debate:

1.      Some say they are a cartel: ?Organized crime?: The Unions raise the wages above the level that would prevail in competitive markets and they reduce the quantity of labor demanded, which in turn causes some workers to be unemployed. Basically some workers benefit at the expense of others.

2.      Advocates for unions feel that unions are necessary to the market power of firms that hire workers.  Some Companies move into small towns and hire the majority of people from that town.  The firm takes advantage of the small community and if the workers don?t agree to the firm?s price then they can move to another town and get a different job.  ( Of course this is harder to do)  So without the union the people put up with the Bull from those large firms.  Those with a union have power about how the company controls the wages and the working conditions.  Those Unions protect against wage robbery and they help to establish work conditions.

Basically there is no real Answer to:      are unions good or bad for the economy.

1.      Worker health improves

2.      Work Turnover is lower:  Less people are willing to give up a good paying job.

3.      Worker Quality:  Can hire in better talent when you offer a better pay scale.

4.      Worker Effort: Higher wages gives worker the incentive to work harder.

The set of assets in an economy that people regularly use to buy goods and services from other people.

1.      Medium of exchange :

        An item that the buyer gives to sellers when they want to purchase goods and services:

2.      Unit of account:

        A yardstick people use to post prices and record debt

3.      Store of Value:

        An item that people can use to post prices and record debts

Commodity Money :

                Money that takes the form of a commodity with intrinsic value: An item would have values even if it were not used as money such as Gold.

Fiat Money: Money without intrinsic value such as an order or decree and is established as money by the government: Money in your pocket Compared to Monopoly game money:  The money in your pocket says ?This note is legal tender for all debts, public or private.?

the paper bills and coins in the hands of the public: Most widely accepted medium of exchange in our country.

balances in the bank account that depositors can access on demand by writing a check.

·        demand deposit s

·        travelers checks

·        Other checkable deposits

·        Currency

·        Savings deposits

·        small time deposits

·        Money Market mutual funds

·        A few minor categories

·        Plus everything in M1

Credit cards are NOT part of the quantity of money

759 billion  / 232 million people =$3272 per person:

1.      It is believed that much of the currency is held abroad. People often prefer US dollars to domestic assets.

2.      Drug dealers, tax evaders and other criminals

·        --The Central Bank of the United States: created in 1913 after a series of banks failed in 1907:  This was to insure the health of the banking system.

·        --Run by the board of Governors (14 year terms) this has 7 members appointed by the president and confirmed by the senate.  The chairman is the highest board member, appointed by the president (serves 4 years) who directs the Fed staff and presides over board meetings and testifies regularly about Fed policy in front of congressional committee.

·        --The Federal Reserve System is made up of the Federal Reserve Board in Washington AND 12 regional Federal Reserve Banks located in major cities around the country.

·        --The presidents of each regional bank are chosen by the bank board of directors, whose members are from the regions banking and business communities.

·        --Fed has TWO jobs:

1.      To regulate banks and ensure the health of the banking system: This falls on the Regional Federal Reserve Banks:

2.      To control the quantity of money that is made available in the economy, known as MONEY SUPPLY.  :: Decisions by policy makers concerning the money supply constitute MONETARY POLICY, which is made by the FEDERAL OPEN MARKET COMMITTEE (FOMC).

·        Made up of seven members of the board of governors and ONLY five of the 12 Regional bank presidents. All 12 attend each FOMC meeting but ONLY 5 can vote.    Those 5 rotate among the twelve regional presidents over time.  The president of the NEW YORK feds ALWAYS gets a vote because the purchase and sale of government Bonds are conducted in the New York Fed?s trading desk.

·        The Fed had the power to increase or decrease the number of dollars in the economy.

·        Changes in the money supply can profoundly change the economy

$100 put into savings remains there until you take it out. No one can touch it.  This means that money would be stored and there would be less money to go around.  The banks would have a higher liability and their assets would match.

Leaving all the money idle in a bank is unnecessary:  Banks then take the $100 dollars and loan SOME of it out keeping only a fraction of the money:  Using the RESERVE RATIO and holding only 10% of the $100  the bank keeps $10 reserve and loans $90.

The Bank is still Liable for the $100 but it is now using the money to stimulate the economy.

The person who receives the $90 puts the money into the bank and the bank keeps $ 9 for the reserve and offers a loan for $ 81.  This cycle continues and the banks look like they are creating money out of thin air.

Banks create more money for use but they DO NOT create wealth