Download Chapter 13 Economic Challenges

Chapter 11
Economic Challenges
Section 1
Unemployment
• There are four types
of unemployment.
• Frictional
• Structural
• Seasonal
• Cyclical
• Measuring
Unemployment
• Full Employment
Frictional Unemployment
• Frictional unemployment occurs when
someone takes time to find a job.
• Taking time off
• Laid off
• Between jobs
Seasonal Unemployment
• Seasonal
Unemployment
occurs when one’s
employment is based
on factors like
weather and climate.
• Construction workers
• Farm workers
• fishermen
Structural Unemployment
• Structural unemployment occurs when
worker’s skills do not match jobs that are
available.
• There are 5 major causes of structural
unemployment
5 Major Causes of
Structural Unemployment
•
•
•
•
•
The development of new technology
The discovery of new resources
Changes in consumer demand
Globalization
Lack of education
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
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
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
Section 2
Inflation
• The effects of rising prices
• Price indexes
• Causes of inflation
• Effects of inflation
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
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
Inflation by the numbers
• Items costing 100.00
• 1962 = 617.52
• 100.00 (2005) = 16.27 in 1962
• 1987 / 100.00 = 168.11 -2005
• 100.00- 1987 = 59.49 - 2005
Causes of Inflation
• The Quantity Theory
• Demand –Pull Theory
• Cost –Push Theory
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
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.
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
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
Section 3
Poverty
• The Poor
• Causes of Poverty
• Income Distribution
• Antipoverty Policies
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
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
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
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
Reading
• Chapter 21-3
• Pages 551-558 and 564-567
Any Questions