Macroeconomics, CH 9, unemployment and its natural rate Flashcard Example #91990

natural rate of unemployment
the amount of unemployment the economy normally experiences in the long run
the observed unemployment rate fluctuates around the natural rate
the observed unemployment rate differs from the natural rate due to the existence of cyclical unemployment
cyclical unemployment
the year-to-year fluctuations in unemployment around the natural rate
the devotion of unemployment from its natural rate
labor force
the total number of workers, including both the employed and the unemployed
labor force = number of employed + number of unemployed
unemployment rate
the percentage of the labor force that is unemployed
unemployment rate = number of unemployed/labor force X 100
labor force participation rate
the percentage of the adult population that is in the labor force
LFPR = labor force / adult population X 100
discouraged searchers
individuals who would like to work but have given up looking for a job
frictional unemployment
unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills, explains relatively short spells of unemployment
structural unemployment
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
job search
the process by which workers find appropriate jobs given their tastes and skills
wage laws
unions
efficiency wages
what happens when wages are set above the level that brings supply and demand into equilibrium
frictional unemployment is often the result of changes int eh demand for labor firms
frictional unemployment is inevitable because the economy is always changing
why is some frictional unemployment inevitable
government-run employment agencies
public training programs
how do government programs try to facilitate the job search?
employment insurance
a government program that partially protects workers’ incomes when they become unemployed
the number of hours worked in the past year
the unemployment rate in the area of residence
what considerations determine when and for how long someone can collect EI benefits?
union
a worker association that bargains with employers over wages and working conditions
collective bargaining
the process by which unions and firms agree on the terms of employment
strike
the organized withdrawal of labor from a firm by a union
critics of unions argue that unions are merely a type of cartel; when unions raise wages aboce the level that would prevail in competitive markets, they reduce the quantity of labor demand,d cause some workers to be unemployed, and reduce wages in the rest of the economy
advocates of unions contend that unions are a necessary antidote to the market power of the firms that hire workers
advocates of unions also claim that unions are important for helping firms respond efficiently to workers’ concerns
are unions good or bad for the economy?
efficiency wages
above-equilibrium wages paid by firms in order to increase worker productivity
efficiency wage theory
states that such a constraint on firms is unnecessarily in many cases because firms may be better off keeping wages above the equilibrium level
worker health
worker turnover (the more a firm pays its workers, the less often its workers will choose to leave)
worker effort (high wages make workers more eager to keep their jobs)
worker quality (higher wages encourage better workers to apply for the job)
what are possible efficiency-wage theories?

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