Unemployment and its Natural Rate (Chapter 15) Flashcard Example #56663

labor force
total # of workers, including the employed and unemployed
Employed: paid, self-employed, unpaid workers in family family biz
Unemployed: ppl not working who have been looking for 4 weeks
Not in the labor force: everyone else
Analyzed how the unemployment rate and participation rate are calculated
Unemployment rate: U-rate=100x (#of unemployed/labor force)
Labor Force participation rate: % of adult pop that is in labor force
Labor force = 100x (labor/adult pop)
What the rate does and does not measure
Excludes discouraged workers, doesn’t distinguish bw full time and part time work, ppl misreport work status
Analyzed the categories of unemployment:
Frictional unemployment: occurs when workers join workforce or change jobs/ short term for most workers
Stuctural unemployment: due to the structure of the economy, min. wage, unions, chanign structure of employment, long term
Defined the Natural Rate of unemployment:
normal rate of unemployment around which the actual unemployment rate fluctuates APPROX 5.6%
Analyzed cyclical unemployment
The deviation of unemployment from its natural rate associated with business cycles

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