Download Economic Challenges

Economic Challenges
Chapter 13
Types of Unemployment
 Frictional Unemployment
 Changing jobs
 Seasonal Unemployment
 Time of the year
 Structural Unemployment
 Mismatch of job skill of employee / employer
needs
 Cyclical Unemployment
 Part of the business cycle
Structural Unemployment
 Most sever problems
 Causes
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New technology
Discovery of new resources
Changes in consumer demand
Globalization
Lack of education
 Solution
 Retraining
Measuring Employment
 Census
 Labor force = unemployed + employed
 Unemployed = 16 years old, looking for full
time employment
Full Employment
 The level of employment reached when
there is no cyclical unemployment,95%
employment or 5% unemployment
 Does not measure
 Underemployed
 Discouraged workers
Inflation
 A general increase in prices
 Inflation decreases purchasing power
Price Indexes
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Consumer Price Index
Market basket (urban family of 4)
Base year
CPI = updated cost / base year cost x
100
Types of Inflation
 Core inflation rate ( no food or energy)
 hyperinflation
Cause of Inflation
 Quantity theory of money (MS > GDP)
 Demand pull inflation
 Cost push inflation
 Wage - price spiral
Effects of Inflation
 Purchasing power
 Inflation up; purchasing power down
 Buy on credit
 Income
 colas
 Interest rates
 Interest rates > inflation rate -- encourage
savings
 Higher interest rates slow economy
Recent Trends
 Deflation
 Global economy
 efficiency
Poverty
 Poverty threshold: income level below
which income is insufficient to support a
family or household
2011 Poverty Guidelines
HHS
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Family USA
1 $10,890
2 14,710
3 18,530
4 22,350
5 26,170
6 29,990
7 33,810
8 37,630
Alaska
$13,600
18,380
23,160
27,940
32,720
37,500
42,280
47,060
Hawaii
$12,540
16,930
21,320
25,710
30,100
34,490
38,880
43,270
2012 Poverty Guidelines
HHS
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Family
1
2
3
4
5
6
7
8
48 states
$11,170
$15,130
$19,090
$23,050
$27,010
$30,970
$34,930
$38,890
Alaska
$13,970
$18,920
$23,870
$28,820
$33,770
$38,720
$43,670
$48,620
Hawaii
$12,860
$17,410
$21,960
$26,510
$31,060
$35,610
$40,160
$44,710
Poverty Rate
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Race and ethnic origin
Type of family
Age
Residence (region)
Causes of Poverty
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Lack of education
Location
Racial / Gender discrimination
Economic shifts: last hired/ first fired
Changes of family structure
Lorenz Curve
 Distribution of income in a nation
 Divided over quintile (1-5)
Lorenz Curve
Shifts in the Lorenz Curve
 More inequality: shifts outward
 Class rigidity
 Missing middle class
 Less inequality: shifts inward
 Poverty of most the population
 More social / economic mobility
 Middle class
Anti-Poverty Programs
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Enterprise zones
Employment assistance
Education / Retraining Programs
Welfare reform: Temporary Assistance
for Needy Families (TANF)
 Workfare