Lecture 13 unemployment

1. Macroeconomics
Lecture 13
Unemployment

2. Questions

3. Quiz

4. 1.Are you included in the labor force?
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

5. Natural Rate of
Unemployment
The normal rate of
unemployment around
which the unemployment
rate fluctuates

6. Cyclical
Unemployment
The deviation of
unemployment from its
natural rate

7. Unemployment
Frictional
Seasonal
Structural

9. Frictional
Time to find a new job

10. Seasonal
Demand changes with
the season

13. Structural
Too many workers
Change in demand for
skills

15. What kind of
unemployment
is caused by
smartphones?

16. Structural
Creative Destruction
10% aYear

17. Structural
Learn a new skill

18. Unemployment
Insurance
Government program to
provide income when
workers become
unemployed

19. Unemployment
Insurance
Unintended Consequence
Moral Hazard
May prolong unemployment

20. Why are wages too
high?
Minimum wage laws
Unions
Efficiency Wages

21. Minimum Wage Laws
Government sets a
minimum wage that can
legally be paid

22. $0
$5
$10
$15
$20
0 10 20 30 40 50 60
Supply
Demand
Wage
Workers
Equilibrium
Wage
30 workers
30 jobs
no
unemployment
Minimum Wage
40 workers
20 jobs
20 unemployed
workers
Minimum Wage
20 workers
get a raise
10 workers
lose job
10 new
unemployed
workers
Minimum
Wage

23. Unemployment
Insurance
a government program
that pays people when
they become
unemployed

24. Union
Worker association that
negotiates with
employers over wages,
benefits, and conditions

25. Union
One contract for all
employees
Strike
Conflicts between workers

26. Efficiency Wages
Higher wages make
more productive
employees

27. Efficiency Wages
Employee Wage Pizzas Productivity
Wage per Pizza
Bob $10 5 $2.00
Bill $20 12 $1.67

28. Efficiency Wages
More Healthy
Lower Turnover
Higher Quality
More Effort

30. The Monetary System

31. Key Terms
money
medium of exchange
unit of account
store of value
liquidity
commodity money
fiat money
currency
demand deposits
central bank
money supply
monetary policy
reserves
fractional-reserve banking
reserve ratio
money multiplier
bank capital
leverage
leverage ratio
capital requirement
open-market operations
discount rate
reserve requirements

32. Two Choices
Make
or
Trade

33. Barter
Direct trade - stuff for stuff
No money
Double coincidence of
wants

34. Both sides have to want what the other side has
Double coincidence of wants

35. Both must want what
the other has at the
same time
Double coincidence of
wants

36. Money makes trade easier

37. What is money?

38. Money
Something people use to
trade with

42. Why would you accept a
cigarette if you didn’t smoke?

44. Functions of Money
Medium of exchange
Unit of account
Store of value