Eco Notes 4 Unit 2

Eco Notes 4 Unit 2 2/3/15

Unemployment- percentage of people who do not have jobs, that are in the labor force, ideal is 4%

Labor Force- a number of people in a country that are classified as either employed or unemployed

Not in the Labor Force- kids, military personnel, mentally insane, incarcerated or in prison, retired, stay at home parents, full time students, discouraged workers

Unemployment rate= # of unemployed / ((# of unemployed + # of employed))* 100

Types of unemployment
Frictional	Structural	Seasonal	Cyclical
Between jobs Choose new opportunities, new choices, new lifestyle, or new education level Leave one job for a better one	Technology changing Associated with a lack of skills or a declining industry	Waiting for the right season to go to work ex. Santa Claus, lifeguards, and construction workers: don’t work in rain.	Occurs due to a swing in the economy has to do with a business cycle bad for society and individuals

What is full employment?  Occurs when there is no cyclical unemployment present in the economy

NRU- national rate of unemployment- 4 to 5% same as full employment economy is working at best potential possible

Why is unemployment bad? 3 reasons

1.       Not  enough consumption (GDP)

2.       Too much poverty

3.       Too much government assistance

Why is unemployment good?

1.       There is less pressure to raise wages

2.       There is more workers available for future expansions

Okun’s Law – for every 1% of unemployment above the NRU causes a 2% decline in real GDP