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ECON 203: Test 3
Unemployed |
Individuals who do not currently have a job but who are actively looking for work |
Employed |
Individuals who currently have jobs |
Labor Force |
Unemployed plus employed individuals over 16 years old |
Unemployment Rate |
Percentage of people in the labor force who are unemployed |
Discouraged Workers |
Former job seekers who have stopped looking for work; not unemployed |
Cyclical Unemployment |
Associated with increases and decreases in real GDP |
Frictional Unemployment |
Occurs naturally as people take time to find an appropriate job |
Structural Unemployment |
Refers to the mismatch between job openings and the skills of workers seeking jobs |
Seasonal Unemployment |
Occurs when industries slow or shut down for a specific period or make regular shifts in production schedules |
Full Employment |
Equal to the natural rate of unemployment; not zero unemployment |
Natural Rate of Unemployment |
Frictional plus structural unemployment; no cyclical unemployment included |
Marginally Attached Workers |
Individuals who are not actively looking for work but will accept a job if one “appears”; not counted as unemployed |
COLA |
cost of living adjustment – automatically increases wage/benefit to offset inflation |
Real v. Nominal Calculations |
real figures have been adjusted for inflation while nominal figures are stated in current dollars |
inflation |
an increase in overall prices in an economy from one time period to another |
inflation rate |
the percent increase in prices |
consumer price index |
a measure of price changes in a group of products typically bought by consumers |
quantity theory |
inflation may be caused by too much money in circulation; i.e., the money supply grows faster than the economy |
demand-pull theory |
inflation may be caused by excessive demand; i.e., aggregate demand grows faster than aggregate supply |
cost-push theory |
inflation may be caused when producers raise prices in order to cover increased costs; can lead to a wage-price spiral |
menu costs |
associated with physically changing prices |
shoe leather costs |
associated with additional “wear and tear” to maintain sufficient cash |
deflation |
a decrease in overall prices in an economy from one time period to another |
indexing |
statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base period or from the previous month |
GDP |
Gross Domestic Product -- market value of all goods & services. |
GDP equation |
C+I+G+(X-M) |
GNP |
market value of final goods & services produced in country in a year. |
transfer payments |
not included in GDP. Funds transfered like retirement, SS. |
Comsumption |
Spending by households on goods and services. Includes spending on things such as cars, food, and visits to the dentist. Makes up 70% of GDP. |
Investment |
Spending by firms on machinery factories, equipment, tools, and construction of new buildings. Includes households' purchase of new houses. Includes excess business inventory. |
Government |
Spending by all levels of government of goods and services. Includes spending on the military, schools, and highways. Excludes transfer payments. |
Net Exports |
(X-M) Spending by people on US goods and services (Exports or X) minus spending by people in the US on foreign goods and services (imports or M). |
Fiscal Policy |
Changes in federal taxes and federal government spending designed to affect the level of aggregate demand in the economy. |
Discount Rate |
Fed to bank interest rate |
eserve Requirement |
Unloanable funds set by the Fed for banks. |
Open Market Operations |
bank to bank buying/selling of government securities to influence the fed funds rate. |
Stagflation |
No growth in economy. Inflation and unemployment is a problem at the same time. |
Monetary Policy |
Stabilize the economy by changing the rate of growth in money supply. in a recession, the Fed increase money supply, which would lead to an increase in aggregate expenditures. In inflation, the Fed reduces money supply. |