Chapter 8:
Download
1 / 17

Chapter 8: - PowerPoint PPT Presentation


  • 128 Views
  • Updated On :

Chapter 8:. Fiscal Policy: Coping with Inflation & Unemployment. 3/11/2014. AS. Price Level. P 2. P 3. AD 2. P 1. AD 3. AD 1. 0. Y 1. Y 2. Aggregate Output. Different Types of Unemployment:. Frictionally Unemployed Structurally Unemployed Cyclically Unemployed

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Chapter 8:' - giselle


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Slide1 l.jpg

Chapter 8:

Fiscal Policy: Coping with Inflation & Unemployment

3/11/2014


Slide2 l.jpg

AS

Price Level

P2

P3

AD2

P1

AD3

AD1

0

Y1

Y2

Aggregate Output


Slide3 l.jpg

Different Types of Unemployment:

  • Frictionally Unemployed

  • Structurally Unemployed

  • Cyclically Unemployed

  • Discouraged Workers

  • Underemployed Workers


Slide4 l.jpg

1. Frictionally Unemployed:

Relatively brief periods of unemployment caused by people deciding to voluntarily quit work in order to seek more attractive employment.

2. Structurally Unemployed:

Unemployment that results from fundamental technological changes in production, or from the substitution of new goods for customary ones.


Slide5 l.jpg

3. Cyclically Unemployed:

Unemployment associated with the downturn and recession phases of the business cycle.

4. Discouraged Workers:

Unemployed people who give up looking for work after experiencing persistent rejection in their attempts to find work.


Slide6 l.jpg

5. Underemployed Worker:

Workers employed in jobs that do not fully utilize their productive talents or experience.


Slide7 l.jpg

Number of Workers and Type of Unemployment:

Total Unemployment =

150 +

200 +

500 +

250 +

300

= 1,400

True Unemployment Rate =


Slide8 l.jpg

The Bureau of Labor Statistics (BLS):

Two Questions:

Q1. Are you presently gainfully employed?

Q2. Are you actively seeking employment?


Slide9 l.jpg

Number of Workers and Type of Unemployment:

250

Labor Force =

10,250

= 10,000

Actual Unemployment Rate =


Slide10 l.jpg

BLS’s Rate of Unemployment

Actual Unemployment Rate = 8.5%

150

+ 200

Natural Rate of Unemployment

=

= 3.5%

10000

Actual Rate of Unemployment = Natural Rate of Unemployment +

Cyclical Rate of Unemployment

8.5% = 3.5% +

5%


Slide11 l.jpg

AS

Price Level

P2

P3

AD2

P1

AD3

AD1

0

Y2

Y1

Aggregate Output


Slide12 l.jpg

Winners and Losers from Inflation:

Who Loses from Inflation?

  • People on fixed income

  • Lenders

  • Savers


Slide13 l.jpg

Who Gains from Inflation?

  • Borrowers

  • Government

Moderating the Wins and Losses:

Variable Rate of Interest

Cost of Living Index (COLA)


Slide14 l.jpg

AEa

$

AE100

Recessionary Gap

0

800

1200

Y

Price Level

105

100

AD

800

1200

Y


Slide15 l.jpg

Recessionary Gap:

The amount by which aggregate expenditure falls short of the amount needed to generate full employment national output.


Slide16 l.jpg

AEb

AEa

$

Inflationary Gap

0

1200

1600

Y

Price Level

133

105

AD

1200

1600

Y


Slide17 l.jpg

Recessionary Gap:

The amount by which aggregate expenditure falls short of the amount needed to generate full employment national output.

Inflationary Gap:

The amount by which aggregate expenditure exceeds the level needed to generate full employment national output.


ad