- the failure to use available resources, particularly labor, to produce desired goods and services.
- Unemployment Rate:
-4% - 5% is full employment- Natural Rate of Unemployment (NRU)
- Labor Force:
- above 16 yeas old- able and willing to work
- NOT in the Labor Force:
- military- jail/prison folks- mental institution folks- retirees- under 16- students- homemakers- people who are not looking for a job
- How to Calculate the Unemployment Rate:
- # of unemployed/(# of employed + # of unemployed) x 100
- Types of Unemployment:
Frictional- temporarily unemployed- in-between jobs1. possibly a high school/college grad looking for jobs2. left old job for a better position- looking for better opportunities
Seasonal- due to time of year and nature of the job1. bus drivers2. santa claus impersonators3. lifeguard
Structural- workers do not have transferable skills and these jobs will never come back- need to learn a new skill
Cyclical- results from economics down turns- as demand for goods and services falls, demand for labor and workers falls tooex) recession
GDP Gap: it is the amount by which actual GDP falls short of potential GDP
Okun's Law: For every 1% in which the actual employment rate exceeds natural rate of unemployment a GDP gap of 2% occurs
-Ex: in 2012, unemployment rate for Mexico was 7.4%, natural rate of unemployment rate for Mexico was 6%
7.4-6= 1.4 x 2Rule of 70: use to determine how many years it will take for a value to double given a particular annual growth rate
-Ex: If you put 20,000 dollars in the bank and it earns a yearly interest of 7%, how many years will it take for your income to double?
70/7 = 10 years(answer)
Girl yes, I love when people put videos! That video especially, helps with the overall comprehension of unemployment and the four different types of unemployment. Remember, a great example for Structural unemployment is when government cuts funding on places like NASA, and someone specifically trained to build spaceships loses their job. That person can't just move on to building cars. Therefore, their skills are NOT transferable.
ReplyDeleteGreat blog, good job Tracy!
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ReplyDeleteVery informative blog entry! Did you know that a country's natural rate of unemployment is comprised of its structural and frictional unemployment rates? Natural rate of unemployment is also referred to as "full employment" unemployment rate.
ReplyDeleteDid you know that full employment means no cyclical employment? Economists define it as being an acceptable level of unemployment above 0%. In actually 0% unemployment overall is considered undesirable!
ReplyDeleteIs there a way for you to give a scenario on GDP gap? What exactly is potential GDP and is there a way to calculate it?
ReplyDeleteOkuns had me a bit a confused but your blog has helped me clear the confusion but remember to not let that 2 confuse your calculations. when the actual unemploment is greater than the unemployment then you multiply by 2 but if it is not all you have to do is just subtract!
ReplyDeletenatural unemployment then you multiply *
DeleteDid you know? Frictional & Structural are the unavoidable types of unemployment.
ReplyDelete