Download CH 12 - Kenston Local Schools

chapter 12
Challenges to the Free
Market System
12-1 Unemployment
12-2 Inflation
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
1
chapter 12
12-1
Unemployment
Learning Objectives
LO1-1 Explain how economists measure unemployment.
LO1-2 Identify the different types and impact of
unemployment.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
2
chapter 12
12-1
Unemployment
Vocabulary
Measuring Unemployment
unemployment rate
discouraged worker
underemployed
Types of Unemployment
frictional unemployment
seasonal unemployment
structural unemployment
outsourcing
cyclical unemployment
full unemployment
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
3
chapter 12
Measuring Unemployment
The unemployment rate is the percentage of the
civilian labor force that is actively seeking work but
is not employed.
 Many people without jobs are not classified as
unemployed and are not counted as part of the labor
force.
 Babies, full-time students, and retired persons do not
count as unemployed. Individuals who are ill or
severely disabled are not considered to be
unemployed. There are other groups that are also
not counted.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
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chapter 12
Measuring Unemployment
Discouraged workers are persons who want to
work, but have given up looking for work.
 Many people believe that during a recession, the
unemployment rate underestimates the problem of
people who lack work by not counting discouraged
workers.
Underemployed persons work at jobs below their
skill levels, or work part-time when they want to
work full-time.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
5
chapter 12
Measuring Unemployment
Vocabulary
CHECKPOINT
The civilian population over age
16 is 120 million and the number
of these people not in the labor
force is 40 million. There are 10
million unemployed people. What
is the unemployment rate?
unemployment rate
discouraged worker
underemployment
Unemployment rate = unemployed × 100 civilian labor force: 8.3% = 10
million persons × 100/120 million persons; The 5 million persons who
are discouraged workers are not in the civilian labor force, and
therefore not counted in the unemployment rate.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
6
chapter 12
Types of Unemployment
Frictional unemployment is temporary
unemployment caused by the time required for
workers to move from one job to another or find
initial employment.
 The cause of frictional employment is the transition
time to match a job applicant with a vacancy.
 Economists consider frictional unemployment as a
normal condition of any economy permitting freedom
of job choice.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
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chapter 12
Types of Unemployment
Seasonal unemployment is unemployment caused
by changes in the seasons.
Structural unemployment is unemployment caused
when the skills of workers do not match the skills
required for existing jobs.
 The four causes of structural unemployment are: lack
of education, changes in consumer demand,
technological advances, and globalization.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
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chapter 12
Types of Unemployment
Outsourcing is the practice of a company having its
work done by another company in another country.
Cyclical unemployment is unemployment caused
by the lack of jobs during a recession.
 When GDP falls, companies close, jobs disappear, and
workers scramble for fewer available jobs.
 The Great Depression is a dramatic example of
cyclical unemployment. The Great Recession
beginning in 2007 is another example.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
9
chapter 12
Measuring Unemployment
Full unemployment is the rate of unemployment
that exists without cyclical unemployment.
 Full unemployment occurs when an economy
operates at an unemployment rate equal to the sum of
the frictional, seasonal, and structural unemployment
rates.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
10
chapter 12
Types of Unemployment
Vocabulary
CHECKPOINT
Did the invention of the
wheel cause frictional,
seasonal, structural, or
cyclical unemployment?
frictional unemployment
seasonal unemployment
structural unemployment
outsourcing
cyclical unemployment
full unemployment
The invention of the wheel represented a new technology for primitive
people. Even in the primitive era, many workers who transported goods
lost their jobs to the more efficient cart with wheels. The invention of
the wheel caused structural unemployment, you are correct.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-1 Unemployment
11
chapter 12
12-2
Inflation
Learning Objectives
LO2-1 Explain the impact of inflation, how it is measured,
and how it affects consumer lifestyles and decision
making.
LO2-2 Define the patterns of inflation in a market economy.
LO2-3 Describe the causes and effects of inflation in a
market economy.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12
chapter 12
12-2
Inflation
Vocabulary
Impact of Inflation
inflation
Patterns of Inflation
disinflation
hyperinflation
deflation
Inflation Causes and Effects
demand-pull inflation
cost-push inflation
real-cost inflation
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
13
chapter 12
Impact of Inflation
Inflation is the increase in general price level for
goods and services.
 When prices rise faster than income, buyers lose
purchasing power. In other words, the money
workers earn will buy less as prices rise.
 Rising price levels affect both consumers and
producers in a market economy. As the value of the
dollar goes down, it buys less. As inflation goes up,
the value of the dollar goes down.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
14
chapter 12
Impact of Inflation
Vocabulary
CHECKPOINT
inflation
How does inflation
affect a person’s
income and lifestyle?
Inflation reduces the purchasing power of income and savings. It
forces most people to give up some types of spending.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
15
chapter 12
Patterns of Inflation
When prices are rising but the rate of increase is
slowing, the economy is in a period of disinflation.
When prices are rising so rapidly that they are out of
control, there is hyperinflation.
When the general level of prices is decreasing, the
economy is experiencing a period of deflation.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
16
chapter 12
Patterns of Inflation
Vocabulary
CHECKPOINT
How is disinflation
different from
inflation?
disinflation
hyperinflation
deflation
Disinflation is a slowing of how fast prices are going up while inflation
simply refers to an increase in the average price level.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
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chapter 12
Inflation Causes and Effects
Demand-pull inflation results in higher prices
because consumers want to buy more goods and
services than producers are willing or able to supply.
 Demand-pull inflation is the most common form
of inflation.
 This type of inflation is often described as “too many
dollars chasing too few goods.”
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
18
chapter 12
Inflation Causes and Effects
Cost-push inflation occurs when producers raise
prices because their costs to create products are
rising.
 For example, when wages go up, the cost of
producing a product goes up.
 Producers raise prices to cover the increased costs. If
they do not raise prices, profits will shrink.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
19
chapter 12
Inflation Causes and Effects
As resources become scarce or more difficult to get,
prices rise in the form of real-cost inflation.
 Over time, resources in high demand may shrink in
supply. To avoid this type of inflation, societies must
find alternate resources or products or change their
habits to reduce the need for the resource.
 Real-cost inflation can result from a combination of
demand-pull and cost-push happening at the same
time.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
20
chapter 12
Impact of Inflation
Vocabulary
CHECKPOINT
What is the most
common form
of inflation?
demand-pull inflation
cost-push inflation
real-cost inflation
The most common type of inflation is demand-pull inflation.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
12-2 Inflation
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