2. If 300 people are unemployed and the unemployment rate is 6%, how many people are employed?
3. What is the labor force participation rate in the U.S.?
4. If I am unemployed and become a discouraged worker, what happens to the unemployment rate?
5. Over the past 70 years has the labor force participation rate increased for decreased for men?
Quiz 4 Name__________
No
5,000
63%
Goes down
Decreased
Natural Rate of Unemployment
The normal rate of unemployment around
which the unemployment rate fluctuates
Cyclical Unemployment
The deviation of unemployment from its
natural rate
Unemployment
FrictionalSeasonalStructural
Frictional
Time to find a new job
Seasonal
Demand changes with the season
Structural
Too many workers
Change in demand for skills
What kind of unemployment
is caused by smartphones?
Structural
Creative Destruction
10% a Year
Structural
Learn a new skill
Unemployment Insurance
Government program to provide income when
workers become unemployed
Unemployment Insurance
Unintended ConsequenceMoral Hazard
May prolong unemployment
Why are wages too high?
Minimum wage lawsUnions
Efficiency Wages
Minimum Wage Laws
Government sets a minimum wage that can
legally be paid
$0
$5
$10
$15
$20
0 10 20 30 40 50 60
Supply
Demand
Wage
Workers
Equilibrium Wage
30 workers30 jobs
no unemployment
Minimum Wage40 workers
20 jobs20 unemployed
workers
Minimum Wage20 workersget a raise10 workers
lose job10 new
unemployed workers
MinimumWage
Unemployment Insurance
a government program that pays people when
they become unemployed
Union
Worker association that negotiates with
employers over wages, benefits, and conditions
Union
One contract for all employees
Strike
Conflicts between workers
Efficiency Wages
Higher wages make more productive
employees
Efficiency Wages
Employee Wage Pizzas ProductivityWage per Pizza
Bob $10 5 $2.00
Bill $20 12 $1.67
Efficiency Wages
More HealthyLower TurnoverHigher Quality
More Effort
The Monetary System
Key Termsmoneymedium of exchangeunit of accountstore of valueliquiditycommodity moneyfiat moneycurrencydemand depositscentral bankmoney supplymonetary policy