CHAPTER 8 Labor Force: people in adult population who are either working or looking for work Unemployed: those who want a job but can?t find one Unemployment Rate: measures percentage of those in the labor force who are unemployed (monthly) Unemployment Rate = Labor Force / Number Unemployed Labor Force Participation Rate = Number in Labor Force / Adult Population Sources of Unemployment Frictional: when job seekers and employers need time to find each other Seasonal: caused by seasonal changes in demand for certain kinds of labor (ex. landscaping jobs decrease during winter months) Structural: mismatch of skills or geographic location (ex. golf carts replace need for caddies, smoking less caused decreased need for tobacco farmers) Cyclical: fluctuates with business cycle, increasing during contractions and decreasing during expansions Full Unemployment: no cyclical unemployment but most likely still some frictional, structural, and seasonal unemployment (usually ranges from 4-6% rate) Underemployment: workers who are overqualified for their jobs (part time workers with Ph.D.) or work fewer hours than preferred Social Security Act of 1935 provided unemployment insurance financed by tax on employers; unemployed workers who meet certain qualifications can receive unemployment benefits for up to 6 months, provided they actively look for work Hyperinflation: very high rate of inflation Deflation: sustained decrease in price level Disinflation: reduction in rate of inflation Inflation results from (1) demand-pull inflation: increase in aggregate demand (2) cost-pull inflation: decrease in aggregate supply Stagflation: result of increase in price and decrease in real GDP Interest: dollar amount paid by borrowers to lenders (interest rate is the annual percentage paid) Loanable Funds: amount of money people are willing to lend interest rates increases = supply curve for loanable funds slopes upward interest rate decreases = demand curve for loanable funds slopes downward Nominal Interest Rate: interest rate expressed in dollars of current value as a percentage of the amount loaned; interest rate specified on loan agreement Real Interest Rate: interest rate expressed in dollars of constant purchasing power as percentage of the amount loaned Real Interest Rate = Nominal Interest Rate - Inflation Rate COLA: cost-of-living adjustment; increase in transfer payment or wage that is tied to the increase in price level McEachern, William A. Macroeconomics A Contemporary Introduction. New York: South-Western College Pub, 2008. Print.
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