economics cp chapter 13 power point
TRANSCRIPT
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Economics CPEconomics CP
Chapter 13 Economic
Challenges
Chapter 13 Economic
Challenges
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Types of Unemployment
Types of Unemployment
• Frictional Unemployment – people unemployed & looking for a job that better suits them
• Seasonal Unemployment – unemployment as a result of seasonal schedules, vacation, or when industry slows or shuts down for season
• Frictional Unemployment – people unemployed & looking for a job that better suits them
• Seasonal Unemployment – unemployment as a result of seasonal schedules, vacation, or when industry slows or shuts down for season
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Types of UnemploymentTypes of Unemployment• Cyclical Unemployment – increases when
economy contracts; decreases when economy expands
• Structural Unemployment – unemployment because worker’s skills do not match available jobs; occurs b/c economy changes
• 5 causes: – New technology– New resources– Changes in consumer demand– Globalization– Lack of education
• Cyclical Unemployment – increases when economy contracts; decreases when economy expands
• Structural Unemployment – unemployment because worker’s skills do not match available jobs; occurs b/c economy changes
• 5 causes: – New technology– New resources– Changes in consumer demand– Globalization– Lack of education
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Measuring Unemployment
Measuring Unemployment
• Department of Labor, Bureau of Labor Statistics
• Determine unemployment rate – national, state, county level– Latest Unemployment Data
• Seasonally adjusted
• Department of Labor, Bureau of Labor Statistics
• Determine unemployment rate – national, state, county level– Latest Unemployment Data
• Seasonally adjusted
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Full EmploymentFull Employment• Do not want 0% unemployment –
no room for expansion in economy• 4-6% is ideal – currently 9%
• Do not want 0% unemployment – no room for expansion in economy
• 4-6% is ideal – currently 9%
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Other employment terminology
Other employment terminology
• Underemployed – working at a job for which they are overqualified or working part-time & want full-time work
• Discouraged worker – gave up looking for a job; not considered in unemployment %
• Underemployed – working at a job for which they are overqualified or working part-time & want full-time work
• Discouraged worker – gave up looking for a job; not considered in unemployment %
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Chapter 13 Section 2 Inflation
Chapter 13 Section 2 Inflation
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InflationInflation• (don’t write) Fact: Prices have a
tendency to increase over time• Inflation: general increase in prices• Purchasing Power: ability to purchase
goods & services• When an increase in inflation causes a
decrease in purchasing power, it is problematic!
• (don’t write) Fact: Prices have a tendency to increase over time
• Inflation: general increase in prices• Purchasing Power: ability to purchase
goods & services• When an increase in inflation causes a
decrease in purchasing power, it is problematic!
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Determining InflationDetermining Inflation
• Need a price index – measurement of how the average price of a group of goods changed over time
• Indices used for – consumers to change spending habits– gov’t to adjust payments– unions to demand wages
• Need a price index – measurement of how the average price of a group of goods changed over time
• Indices used for – consumers to change spending habits– gov’t to adjust payments– unions to demand wages
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Major Price Indices (3 of ‘em)
Major Price Indices (3 of ‘em)
1. CPI – Consumer Price Index– 200 items in market basket
(collection of goods/ services)– measured monthly– “urban goods”– base year (1982-1984) assigned 100
1. CPI – Consumer Price Index– 200 items in market basket
(collection of goods/ services)– measured monthly– “urban goods”– base year (1982-1984) assigned 100
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Major Price IndicesMajor Price Indices
2. PCE – Personal Consumption Expenditure
– Asks individuals how much spent in month
– Eliminates problem of substitutes
2. PCE – Personal Consumption Expenditure
– Asks individuals how much spent in month
– Eliminates problem of substitutes
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Major Price IndicesMajor Price Indices
3. PPI – Producer Price Index– Cost of goods at intermediate states
of production– Precursor to increase of CPI or PCE
3. PPI – Producer Price Index– Cost of goods at intermediate states
of production– Precursor to increase of CPI or PCE
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Inflation rateInflation rate• Def: % rate of change in price
level over time• Ideally: 1-3%; 5% =
instability• Often food & energy prices
increase inflation; core inflation rate = inflation rate calculated w/o food & energy
• Hyperinflation = inflation out of control; 100% to 500% per year; economic collapse
• Def: % rate of change in price level over time
• Ideally: 1-3%; 5% = instability
• Often food & energy prices increase inflation; core inflation rate = inflation rate calculated w/o food & energy
• Hyperinflation = inflation out of control; 100% to 500% per year; economic collapse
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It’s time for a simulation …
also known as … Why can’t the government just print as much money as possible?
It’s time for a simulation …
also known as … Why can’t the government just print as much money as possible?
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Causes of InflationCauses of Inflation
• quantity theory: too much $$$ in the economy; eliminate this by increasing the money supply at the same rate in which the economy is growing
• quantity theory: too much $$$ in the economy; eliminate this by increasing the money supply at the same rate in which the economy is growing
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Causes of InflationCauses of Inflation
• demand-pull theory: “too many dollars chase too few goods”– demand for goods & services exceed
increasing supplies
• demand-pull theory: “too many dollars chase too few goods”– demand for goods & services exceed
increasing supplies
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Causes of InflationCauses of Inflation
• cost-push theory: inflation occurs when producers increase prices to meet increased costs
– led by wage increase b/c low unemployment cause companies to compete for workers
– wage price spiral: rising wages cause higher prices; higher prices cause higher wages(p. 342)
• cost-push theory: inflation occurs when producers increase prices to meet increased costs
– led by wage increase b/c low unemployment cause companies to compete for workers
– wage price spiral: rising wages cause higher prices; higher prices cause higher wages(p. 342)
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Effects of InflationEffects of Inflation
• weakens purchasing power• income: must “keep up” with
inflation; people on fixed income especially impacted
• Interest rate: amount truly gained on savings may depend on rates
• weakens purchasing power• income: must “keep up” with
inflation; people on fixed income especially impacted
• Interest rate: amount truly gained on savings may depend on rates
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Inflation in HistoryInflation in History• Inflation has been
low since the 1970s oil embargo
• Because of high unemployment right now, little chance of inflation except in energy costs
• Inflation has been low since the 1970s oil embargo
• Because of high unemployment right now, little chance of inflation except in energy costs
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Chapter 13 Section 3 Poverty
Chapter 13 Section 3 Poverty
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Defining PovertyDefining Poverty• Poverty
threshold – income level below which income is insufficient to support a family/ household
• Poverty threshold – income level below which income is insufficient to support a family/ household
Persons in familyPoverty guideline
1 $10,830
2 14,570
3 18,310
4 22,050
5 25,790
6 29,530
7 33,270
8 37,010
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Defining PovertyDefining Poverty
• Poverty rate: % of people who live in households with income below poverty threshold
• Children are highest age group in poverty
• Poverty rate: % of people who live in households with income below poverty threshold
• Children are highest age group in poverty
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Causes of PovertyCauses of Poverty
• Not lack of work:– Head of Household makes $8.00/ hour
and works 40 hours/ week– Weekly income: $320; 52 weeks/
year: $16,640/ week– Check out the poverty guidelines; At
what sized household will he/ she be in poverty?
• Not lack of work:– Head of Household makes $8.00/ hour
and works 40 hours/ week– Weekly income: $320; 52 weeks/
year: $16,640/ week– Check out the poverty guidelines; At
what sized household will he/ she be in poverty?
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Causes of PovertyCauses of Poverty
1. LACK OF EDUCATION!!!• Median income of HS dropout:
$18,344• HS grad earns 1/3 more; $24,458• College grad 3 times more: 55,032
1. LACK OF EDUCATION!!!• Median income of HS dropout:
$18,344• HS grad earns 1/3 more; $24,458• College grad 3 times more: 55,032
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Causes of PovertyCauses of Poverty
2. Locationinner city v. suburbs v. ruralcost of living NOT considered
2. Locationinner city v. suburbs v. ruralcost of living NOT considered
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Causes of PovertyCauses of Poverty
3. Racial/ gender discrimination4. Economic shifts5. Family structures
3. Racial/ gender discrimination4. Economic shifts5. Family structures