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Unemployment and Inflation
Economics defines the labor force as all nonmilitary people who are employed or unemployed.
The United States Labor Force
EmploymentMust be 16 years or older
and meet at least one of the following requirements: worked a least one hour for pay
within the last week; or worked 15 or more hours
without pay in a family business; or
held jobs but did not work due to illness, vacations, labor disputes, or bad weather.
UnemploymentMust be 16 years or older
and meet the following criteria: They do not have a job; and They have actively looked for
work in the prior 4 weeks; and They are currently available for
work.
Determining the Unemployment Rate• The Bureau of Labor Statistics polls a sample of the
population to determine how many people are employed and unemployed.
• The civilian non-farm unemployment rate is the percentage of the nation’s labor force that is unemployed.
• Discouraged workers are people who want a job, but have given up looking for one. They are not counted in the labor force.
Types of UnemploymentFrictional Unemployment Occurs when people change jobs, get laid off from their current
jobs, take some time to find the right job after they finish their schooling, or take time off from working for a variety of other reasons
Structural Unemployment Occurs when workers' skills do not match the jobs that are
available. Technological advances are one cause of structural unemployment
Cyclical Unemployment Unemployment that rises during economic downturns and falls
when the economy improves
Other:
Seasonal Unemployment Occurs when industries slow or shut down for a season or make
seasonal shifts in their production schedules
Full Employment• 4 to 6 percent unemployment is normal.• Full employment is the level of employment
reached when there is no cyclical unemployment.
• What about people who are Underemployed?
•http://www.youtube.com/watch?v=yBSb8e-7XCQ
PracticeTravel to the area in the room based on if you
are employed or unemployed according to your scenario card
ShareUnemployed workers will then travel to the
area that designates which type of unemployment category they fall under
•http://www.youtube.com/watch?v=Gk8saiBYXIc
More PracticeJim is a 65 year old man who retired after forty years of
working at IBM. Laura is a 40 year old investment banker who was laid off
six months ago. She decided to switch careers and has spent those six months figuring out what she wants to do instead of applying for jobs in the banking field
Tom is a 36 year old accountant who quit his job so he could go to business school
Moly is a 36 year old moth of three who works part-time as a tutor
Mike is a 50 year old father of two who has been working part-time while raising kids. He has been looking for a full time job without success for over a year
What are the causes of food inflation in the agriculture industry?
Inflation and its EffectsInflation is a general increase in prices. Price level is the relative cost of goods and
services in the entire economy at a given point in time.
• Purchasing power, the ability to purchase goods and services, is decreased by rising prices. When a dollar loses value, it will not buy the same
amount of goods that it did in years past.
Price Indexes A price index is a measurement that
shows how the average price of a standard group of goods changes over time.
The consumer price index (CPI) is computed each month by the Bureau of Labor Statistics.
The CPI is determined by measuring the price of a standard group of goods meant to represent the typical “market basket” of an urban consumer.
Changes in the CPI from month to month help economists measure the economy’s inflation rate.
The inflation rate is the percentage change in price level over time.
Current inflationhttp://www.usinflationcalculator.com/inflation
/historical-inflation-rates/
Causes of InflationThe Cost-Push Theorywhen producers raise prices in order to meet
increased costs.can lead to a wage-price spiral — the process by
which rising wages cause higher prices, and higher prices cause higher wages.
The Demand-Pull Theory
when demand for goods and services exceeds existing supplies
PracticeRead each scenarioDetermine is that person is better off, the
same, or worse due to the inflation?
Harm? Gain? Unaffected? A farmer buys machinery with a fixed-rate loan to be repaid over a 10-year period. G - Farmer makes payments that are less in real terms than the loan amount. Your family buys a new home with an adjustable-rate mortgage. U- It depends on what happens to the future interest rate relative to the inflation
rate. If the real interest rate rises, the family will be hurt. Your savings from your summer job are in a savings account paying a fixed rate of
interest. H - The return from savings will be worth less because of inflation and the fixed
rate of return. Your friend rents an apartment with a three-year lease. G - Rent payments will be lower in real terms. A widow lives entirely on income from fixed-rate corporate bonds H - The purchasing power of the income will be less as inflation continues to
deflate the value of the dollar. Parents are putting savings for their child's college education in a bank savings account. U - It depends on the return on the savings relative to the inflation rate.
Resourceshttp://teachinghighschooleconomics.blogspot.com/
2011/05/inflation-on-pbs-newshour.html
http://www.agmrc.org/renewable_energy/biofuelsbiorefining_general/what-is-driving-food-price-inflation/
Food priceshttp
://www.ifpri.org/sites/default/files/pubs/pubs/confpapers/20080322jvbchinaforum.pdf
http://www.aae.wisc.edu/renk/library/cfrb_january2009_258a.pdf
http://www.stlouisfed.org/education_resources/assets/lesson_plans/MarketBasketLesson.pdf
http://www.thepeoplehistory.com/70yearsofpricechange.html
Calculating InflationTo determine the
inflation rate from one year to the next, use the following steps.
ReviewTrue, false or uncertain, and explain why?
"Gross domestic product measures the amount of wealth in
the economy."False. GDP measures a stream of
production or income in particular year or period
of time. Wealth includes the current value of current value of goods and services
produced in past years.
True, false or uncertain, and explain why? "A decrease in gross domestic product must reduce a person's
standard of living."False. GDP measures the production of
the nation. Even during recessions, manypeople’s real income rises.
True, false or uncertain, and explain why? "If nominal GDP increases by 5 percent and the price level
increases by 7 percent, real GDP has decreased."
True. Real GDP would fall by about 2 percent because the inflation rate is higher
than the rate of growth in nominal GDP.
True, false or uncertain, and explain why? "Frictional and structural unemployment are two words for
the same thing."False. Structural unemployment occurs
because people do not have the skillsnecessary for the jobs available. Frictional
unemployment occurs when people arebetween jobs. They will find employment, but
it will take time to match them withjob vacancies.
True, false or uncertain, and explain why? "If the economy is at full employment, the unemployment
rate is zero."False. At full employment, we have frictional
and structural unemployment.Frictional unemployment occurs when
people are between jobs; structuralunemployment occurs when people do not
have the skills for the jobs that areavailable.