Wrapping up GPA3 types of unemploymentStructural-creative destructionFictionalCyclical-natural rate-full employmentEmployment rate-Unemployment rate-Labor forceShortcomings of GDP (what is not included)1. Non-market production2. Underground activity3. Environmental impacts4. Leisure timeGDP does not measure happiness2.2% last yearUnemployment Rate1. raise during every recession, econ downturn2. never be 0Statemets only economists make“Zero unemployment is not optimal”Creative destructionAgriculture/Industry/ServicesFrictional unemploymentSome jobs available, and some unemployed but limited informationsearch timestructural+frictional unemployment: natural unemploymentfrictional: natural but can decrease-info availability (reduce search time)can increase:-Hiring and firing regulations (if it takes 9 month to fire someone, firms will hire carefully, increasesearch time, increase frictional unemployment)-Unemployment compensationreduce cost of continued searchIncentives matterCyclical unemploymentNatural rate: around 5%compare with 6, the base linefull employmentGDP in 2012: 15.7 trillionu=8%y>15.7%trillionThe output level sustainable for long run.The unemployment ratethe labor force that is unemployment: not the entire populationlabor force: people who are employed or actively seeking work.relevant population 244, 350, 000labor force : 155, 511, 000Not in labor force 1, 859,
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