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Unemployment

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Unemployment

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    1. Unemployment Unemployment is the total number of people not working but seeking employment in the economy The rate of unemployment is the percentage of the labour force who are unemployed Labour force: Number employed plus the number unemployed

    2. Aggregate demand and supply of labour

    3. Disequilibrium unemployment

    4. Unemployment Unemployment and the labour market the aggregate demand and supply of labour equilibrium in the model disequilibrium unemployment equilibrium unemployment

    5. Equilibrium unemployment

    6. Equilibrium unemployment

    7. Equilibrium and disequilibrium unemployment

    8. Equilibrium and disequilibrium unemployment

    9. Equilibrium and disequilibrium unemployment

    10. Unemployment Disequilibrium unemployment real-wage (classical) unemployment demand-deficient (cyclical) unemployment

    11. Unemployment Equilibrium unemployment frictional (search) unemployment structural unemployment changing pattern of demand technological unemployment regional unemployment seasonal unemployment

    12. Frictional Unemployment Frictional unemployment is unemployment due to normal turnover in the labor market

    13. Structural Unemployment Structural unemployment is due to mismatch between the characteristics of available jobs and characteristics of the labor force.

    14. Cyclical Unemployment Cyclical unemployment is the difference between the number of people currently employed and the number of people who would be employed at full-employment. There is cyclical employment when there is a recessionary gap.

    15. Natural rate of unemployment The natural rate of unemployment is the unemployment rate at full-employment level of output.

    16. The NAIRU—The Nonaccelerating Inflation Rate of Unemployment Only when the unemployment rate is equal to the NAIRU is the price level changing at a constant rate (no change in the inflation rate).

    17. The Nonaccelerating Inflation Rate of Unemployment (NAIRU) To the left of the NAIRU the price level is accelerating (positive changes in the inflation rate).

    18. What causes unemployment? Job search – people have different preferences and skills, jobs require differnet skills Wage rigidity – due to minimum wage laws, labor unions, efficiency wages

    19. Efficiency Wages When it is costly for employers to monitor the performance of workers, they find it optimal to pay more than the minimum amount that the workers would accept.

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