Download Unemployment - New Paltz Central School District

Unemployment
One way the economists measure the
health of the economy
Four basic kinds of unemployment
- frictional
- seasonal
- structural
- cyclical
Frictional Unemployment
Unemployment that occurs when people
take time to find job
Examples: people changing jobs, laid off
and looking for more work, need time to
find the right job, right after they finish
schooling
Seasonal Unemployment
Unemployment that occurs as a result of
harvest schedules or vacations, or when
industries slow or shut down for a season
Examples: school schedules, farmers, ski
workers, migrant workers
Structural Unemployment
1.
2.
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5.
Unemployment that occurs when workers skills
do not match the jobs that are available
Five main causes
Development of new tech – vhs manufacture
companies
Discovery of new resources – solar vs electric
industries
Consumer demand – Rc Cola
Globalization – Out sourcing
Lack of Education – dropouts are less likely to
keep jobs than others
Cyclical Unemployment
Unemployment that rises during economic
downturns and falls when the economy
improves
– During recessions demand for goods and
services drop forcing production to slow
and demand for labor slows also
- People laid off because of recession and
when economy improves, will be rehired
Full Employment
The level of unemployment reached when
there is no cyclical unemployment
- everybody who wants a job has one
In a market economy (ours) there will
never be 0 unemployment, 4-6% always
Underemployment – working at a job
when your overqualified, or working parttime when you want to work full-time
Inflation
General increase in prices
Purchasing power – is the ability to
purchase goods and services
As prices rise the purchasing power of
money declines
Price Indexes: A way to measure
inflation
Economists compare price levels or cost of
goods and services for entire country at given
point in time
Price Index – a measurement that shows how
the average price of a standard group of goods
changes overtime
The best know is the Consumer Price Index –
a price index to measuring the price of a
standard group of goods meant to represent the
“market basket” – representation of a group
of goods – of a typical urban consumer
Every 10 years market basket is updated
Causes of Inflation
Quantity theory – too much money in the economy
causes inflation
- monitor the money supply
Demand-pull theory – inflation occurs when demands
of goods and services exceeds supply, making those
items more valuable
Cost-Push theory – producers raise prices in order to
meet increased costs, ex. Oil
- wage-price spiral – the process by which raising
wages cause higher prices, and higher prices cause
higher wages
Effects of Inflation
Purchasing power decreases – if the inflation
rate is 10 percent this year, 100$ to buy goods
last year can only by 90$ worth of goods this
year
Income – If wages do not increase to offset
inflation, they earn less
- Fixed income – income that does not go up
even when prices go up
Interest Rate – If interest rates do not match
inflation rate, savers lose value in their money
Deflation – a sustained drop in price levels