Unemployment: Failure to use available resources, particularly labor, to produce desired goods and services
Population: # of people in a country
Labor Force: # of people in a country that are classified as either employed or unemployed
Employed: 16 y/o or older and have a job; must work at least one hour every two weeks
Unemployed: 16 y/o or older and no job; actively search for job last two weeks
Not in Labor Force: Kids, Mental Institutionalize, Inconcerated-Prison, Disabled, Retirees, Military Force, Homemakers (stay at home parent/s)
Unemployment Rate Formula: # of unemployed / total labor force × 100
Discouraged Workers: workers who has given up after searching
Total Labor Force Formula: # of unemployed + # of employed
4 Types of Unemployment:
- Frictional: temporarily unemployed or in between jobs; qualified workers with transferable skills
- Structural: changes in structure of labor force makes some skills obsolete; workers don't have transferable skills and jobs will not come back; creative destruction; other jobs are lost or destroyed; ex- VCR repairman, Typewriter repairman
- Seasonal: due to time of the year; ex-lifeguards, construction workers, school bus drivers, Mall Santas, Easter Bunnies
- Cyclinal: results from economic downturns such as recession; as demands for goods and services falls, demand for labor falls and workers are laid off
Full Employment or Natural Rate of Unemployment (NRU)
NRU Formula: Frictional + Structural
Full Employment: 4-5% unemployment; No cyclical unemployment
Okun’s Law- when unemployment increases by 1% above natural rate of unemployment; real GDP will fall by 2%
Rule of 70: # of years required for GDP to double; If annual inflation rate is 2%, how many years will it take for GDP to double? 70 / 2 = 35 years
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