Ukraine Crimea Russia wants Crimea from Ukraine increase its GDP but lower Ukraine s GDP increases its capital resource land etc Crimea Important economically for both Russia end of pipeline export big naval station and Ukraine best port Crimean War Russia VS Ottoman Empire France Britain Result indecisive Russian felt they earned Crimea because they shed so much blood defending it USA s Response No intention of going to war with Russia Might cancel joints USA Russia and NATO Will not grant people involved in Crimea takeover visa to USA Russia s Weakness Oil Natural Gas HUGE part of Russian economy 1 Shut down Russia s oil and natural gas exports big trouble 2 Big Problems Might trigger military response from Russia Will hurt Germany s economy a lot Sharp movement of oil natural gas prices can ruin or boost one s economy A LOT ex Russia 2 Lower the world s gas and oil price Indirect threat no military response Both options shift supply curve left right increase supply lower price Execution 1 Make it legal to export crude oil and natural gas Now only legal to export crude oil to Canada they already have plenty Now only legal to export natural gas to countries with free trade agreement ex Mexico 2 Approve Keystone Pipeline XL Pipeline from Canada to Texas Opposed by environmentalists Keypoint Before the only way to hurt another country is military Now the better way is economy CH 8 Causes of Unemployment Important 1 The easiness difficulty in hiring someone 2 Wages amount of pay 3 Retain key workers 4 Willingness to buy purchase Inaccuracy of Unemployment Rate a Recession best time to hire talented workers for future economic expansion 1 Discouraged workers workers that were searching for jobs but gave up a Dropped out of labor force decreases unemployment rate 2 Encouraged workers people who are suddenly interest in find jobs esp in booms a Added to labor force increases unemployment rate 3 Added workers primary breadwinner loses job another fam member steps up a Added to labor force increases unemployment rate 4 Mislabeled workers not searching for jobs but claiming to be for unemployment compensation a Added to labor force increases unemployment rate 3 4 not as big 3 nowadays female are becoming more active in labor force Economy INVERSE w Unemployment rate Four types of unemployment 1 Structure structural of economy changed no longer needed ex leather handbags telegraph operators 2 Cyclical Demand Deficient BIGGEST Business cycle goes up and down jobs availability go up and down Country specific vs Worldwide Demand curve disappeared Solution retrain workers If wages go down equilibrium BUT workers do not like pay cut BUT simpler to fire than pay Demand curve shifts left and downward Solution shortening economic downturn 3 Seasonal seasonal jobs ex life guard Demand curve disappeared and returned a period of time later 4 Frictional there are jobs but take time to place workers in the right jobs Not instantaneous result Two factors Unemployment agency shortened search time Unemployment Insurance protect income increases search From employer s tax rate automatic stabilizer Natural Rate amount of unemployment that does not go away on its own Structural Seasonal Frictional If unemployment rate is lower than natural rate pressure on labor force higher wages Why is there unemployment Job Search 1 2 Unions 3 Efficiency Wages 4 Min Wage Laws Unions togetherness forming a cartel Increase wages training Raise product price lower jobs Efficiency Wages ex Ford When workers pay more than min wage Overpaying 1 Worker Health eat enough to be healthy and efficient in jobs more productive 2 Worker Turnover takes time to train workers low turnover rate save cost 3 Worker Effort overpay extra effort 4 Worker Quality Selection attracts large amount of workers good ones to apply 5 Union Avoidance avoid strike and unions because their pays are already higher 6 Worker Shirking Goofing Off don t need as much supervisors because there is no incentive to goof off might be fired from a good paying job If wages increases 1 Extra supply of labor a More people want high paying jobs 2 Want to hire less workers a Companies don t want to hire as much high paying workers The gap of the two creates unemployment Unemployment Causes 1 Wages increase 2 Job disappeared a Countries with flexible wages have lower unemployment rate a Countries with more workers with general skills have lower unemployment rate CH 9 Jobs Immigration Outsourcing and Offshoring People move around the globe because of economic incentive Creative Destruction job you are trained now can disappear in a couple of decades Immigration Most migration happens for economic reasons Cost VS Benefits 1 Family Reunification most common 2 Refugees Asylum 3 Employment High Skill Low Skill Benefits higher wage health care etc Cost to immigrate traveling expense loss of friends etc NPV HomeEarn NPV New Earn Migration Cost Not much attempt from gov t to find illegal workers Data Homeland security Krugman s Summation of Impact little net benefit hurt worse off U S residents the most increase labor decrease pay Outsourcing company decides that work they used to perform in house will now done by an outside business the comp does not do the function but hire others to do it Offshoring company decides that work done in a country is now better performed outside the country the comp still does the function but doing it elsewhere other countries Can do both at the same time hiring company in other country to do it Reasons for Increasing Importance of Outsourcing and Offshoring 1 Rising Complexity More customizations Only concentrate on what they are expert in then hire others to do the rest 2 Falling Transportation Cost 3 Falling Communication Cost 4 Rising Number of Global Citizens Markets Fresh produce VS Canned goods Good for Clear defined jobs Bad for ill defined jobs need face to face constant decisions Data BLS MLS reports on mass layoff etc Not that much media blowing it out of proportion easier to find problems than benefits ex Nike outsourcing offshoring Policies Location Announcement Made in America Only Special Inspection of Foreign Products Special Tax 2 Problems 1 Freedom to trade 2 Others will also do the same to U S Problems not factory closure BUT new factories not opening New types of jobs are being outsourced Concern trade jobs Hayek VS Keynes Government s 3 Choices 1 Monetary Policy Central bank can change money supply interest rate Short run 2