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AP Economics

AP Economics. Mr. Bernstein Module 13: The Causes and Categories of Unemployment February 19, 2014. AP Economics Mr. Bernstein. The Causes and Categories of Unemployment Objectives - Understand each of the following: The three types of unemployment and their causes

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AP Economics

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  1. AP Economics Mr. Bernstein Module 13: The Causes and Categories of Unemployment February 19, 2014

  2. AP EconomicsMr. Bernstein The Causes and Categories of Unemployment • Objectives - Understand each of the following: • The three types of unemployment and their causes • The factors that determine the natural rate of unemployment

  3. AP EconomicsMr. Bernstein Frictional Unemployment • Millions of jobs are destroyed every month, and new ones are created • Workers change jobs seeking better lifestyle or $$ • There may be time lags between jobs

  4. AP EconomicsMr. Bernstein Structural Unemployment • Arises from structural changes in labor market • Demand for some skills declines • Geographic distribution of jobs changes • Mergers and/or foreign competition • Characterized by persistent surplus of workers • Minimum wage floors • Labor unions • Efficiency wages • Side effects of public policy (ie unemployment insurance)

  5. AP EconomicsMr. Bernstein Structural Unemployment

  6. AP EconomicsMr. Bernstein Natural Rate of Unemployment • Natural Unemployment = Frictional + Structural Unemployment • Cyclical Unemployment are deviations from the natural rate due to business cycle • Actual Unemployment = Natural Unemployment + Cyclical Unemployment

  7. AP EconomicsMr. Bernstein Changes in the Natural Rate of Unemployment • Natural Rate in US is thought to be a bit <5% • What changes Natural rate? Consider… • Changes in Labor Force characteristics (ie age) • Changes in Labor Market Institutions (ie role of unions or rise of efficient, online job search sites) • Changes in government policies (ie subsidies, training programs)

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