Unit 3 - Ch 09- Adjusted

8/9/2019 Unit 3 - Ch 09- Adjusted

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Copyright © 2012 by McGraw-Hill Ryerson

Limited. ll rights reser!ed.

Understanding Economics6 th edition

by Mark Lovewell


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UnderstandingEconomics

Chapter 9Infation and Unemployment

Copyright © 2012 by McGraw-Hill Ryerson Limited !ll rights reser"ed

# th editionby Mar$ Lo"ewell


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/he Cons(mer ricende /he cons(mer price inde 3C 4)

is the most common meas(re o' in*ation

monitors price changes in a representati"e5shopping bas$et6 o' cons(mer prod(ctsincl(des 7(antities in a shopping bas$etdetermined in a base yearcompares prices in the c(rrent year with thosein the base year

Copyright © 2012 by McGraw-Hill RyersonLimited. ll rights reser!ed.


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8imple Cons(mer ricende

ig(re 9 1+ age 2:#


Prices QuantityConsumedper Month

Expenditureper Month

Weights

;20;:

0;<

0

;20 = ;0 ?;?0 = ;0 #

10:0;2 00;1 0

0

Hamb(rgersMil$sha$es

Results o 2 !! "ur#ey

Prices 2 !2 Price 2 !! Quantity

;2 20 10 >;22 00

;1 0< :0 >;:1


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Cons(mer rice nde @eights 3200


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Bominal ers(s RealncomeBominal income is e pressed in c(rrent

dollars

Real income)is e pressed in base-year dollarse7(als nominal income di"ided by the "al(e o'the C 3e pressed in h(ndredths4



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/he Limitations o' theC /he C does not ta$e '(ll acco(nt o')

cons(mer di,erences+ since it is based onthe cons(mption patterns o' an a"erageho(seholdchanges in spending patterns+ since it(ses base-year 7(antitiesimpro"ements in prod(ct 7(ality



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/he GD De*ator /he GD de*ator)indicates price changes 'or all prod(ctsappearing in GDincl(des 7(antities that change each yearcompares prices in the c(rrent year with thosein a re'erence year



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inding Real Gross Domestic rod(ctig(re 9 ?+ age 2?0


92 A2E

100 00122 :A

2

;

EE2A

11


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Bominal ers(s RealGDBominal GD is e pressed in c(rrent dollars

Real GD )

is e pressed in re'erence-year dollarse7(als nominal GD di"ided by the GDde*ator 3e pressed in h(ndredths4



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/he n*ation Rateig(re 9


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n*ation6s F,ects 3a4n*ation redistrib(tes p(rchasing power inarbitrary ways beca(se o' "ario(s types o'inde ation)

'(ll inde ation 3nominal income rises at thein*ation rate4partial inde ation 3nominal income rises at lessthan the in*ation rate4. ed incomes 3nominal income stays constant4



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n*ation6s F,ects 3b4n*ation can also redistrib(te p(rchasingpower between borrowers and lenders

orrowers win i' act(al in*ation anticipatedin*ationLenders win i' act(al in*ation I anticipatedin*ation

orrowers and lenders are (na,ected i' act(alin*ation > anticipated in*ation



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/he Labo(r orce 8(r"ey3a4 /he labo(r 'orce s(r"ey trac$s a randomly

selected sample o' Canadian ho(seholds /he s(r"ey meas(res)

the labo(r 'orce pop(lation+ which incl(desCanadians 1< years o' age or o"er+ with speci.ce cl(sionsthe labo(r 'orce+ which incl(des all those whoeither ha"e a &ob or are acti"ely see$ingemployment



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/he Labo(r orce 8(r"ey3b4 /he s(r"ey also meas(res)

the participation rate+ which is the percentageo' the labo(r 'orce pop(lation that ma$es (pthe labo(r 'orcethe o cial (nemployment rate+ which is then(mber o' (nemployed people in the labo(r'orce as a percentage o' the entire labo(r 'orce



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articipation Ratesig(re 9 #+ age 2?#



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/he Canadian Labo(r orce320104

ig(re 9 A+ age 2?#


articipation rate > labo(r 'orce

labo(r 'orce pop(lation 100 > 1E 1 ?E? 100

1E E 0J


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Drawbac$s o' the % cial

Knemployment Rate /here are three main drawbac$s o' the o cial(nemployment rate)

t does not incl(de (nderemployed wor$ers whoare (nder(tili ed either as part-time wor$ers orby wor$ing at &obs not appropriate to their s$illsor ed(cation

t e cl(des disco(raged wor$ers who are(nemployed and ha"e gi"en (p loo$ing 'orwor$

t is based partly on dishonest responses



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/ypes o' Knemployment /here are 'o(r types o' (nemployment)rictional (nemployment is d(e to being

temporarily between &obs or loo$ing 'or a .rst &ob8tr(ct(ral (nemployment is d(e to a mismatchbetween people and &obsCyclical (nemployment is d(e to *(ct(ations ino(tp(t and spending8easonal (nemployment is d(e to the seasonalnat(re o' some occ(pations and ind(stries



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(ll Fmployment(ll employment)is the highest reasonable e pectation o'employment 'or the economy as a wholeis de.ned in terms o' the nat(ral(nemployment rate+ which incl(des 'rictionaland at least some str(ct(ral (nemploymentin Canada is presently associated with an(nemployment rate between #J and AJ



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/he Knemployment Rateig(re 9 E+ age 2?9



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/he Rise in the Bat(ral

Knemployment Raten recent decades Canada6s estimated nat(ral

(nemployment rate rose beca(se o' se"eraltrends)

str(ct(ral change+ with shrin$ing man('act(ringand e panding ser"icespast re'orms to (nemployment ins(rance 3someo' which ha"e been re"ersed4higher minim(m wages in many pro"inces



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Knemployment Rates by ro"ince+ Gender+and !ge 320104

ig(re 9 9+ age 2


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/he Costs o'KnemploymentHigh (nemployment h(rts indi"id(als and the

Canadian economy as a whole /he cost o' (nemployment 'or the entireeconomy can be meas(red by the di,erencebetween act(al real o(tp(t and potentialo(tp(t+ which is the real o(tp(t associatedwith '(ll employment



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%$(n6s Law!ccording to %$(n6s Law 'or e"ery J pointthat the (nemployment rate e ceeds thenat(ral (nemployment rate+ the gap betweenpotential o(tp(t and real o(tp(t is 2


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oom (st Fcho 3a4Da"id oot s(ggests that o(r ages can gi"e (sinsights into o(r economic '(t(res

/he baby boom generation was born between19?A and 19## t incl(des Generation N+ bornbetween 19#0 and 19##

/he baby b(st generation was born between19#A and 19A9

/he baby boom echo generation was bornbetween 19E0 and 199< t incl(des GenerationN- + born between 1990 and 199<



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oom (st Fcho 3b4!ccording to oot)Fconomic conditions are easiest 'or the babyb(st generation and the .rst parts o' the babyboom generation and baby boom echoFconomic conditions are hardest 'or GenerationN and Generation N-


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Unit 3 - Ch 09- Adjusted

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