ALL ABOUT UNEMPLOYMENT

• Unemployment – percent of people in the labor force to want a job but are not working
• Labor force – consists of the unemployed and the employed
• Employed – work at least one hour a month. Temporarily absent from work. Part time workers.
• Not in the labor force – kids. Full-time students. People in mental institutions. People who are incarcerated. Retirees. Stay at home parents. Military personnel. Discouraged.
• Unemployment rate formula: 100 X number of unemployed/total labor force
• Standard unemployment rate equals 4-5%
• Types of unemployment – frictional unemployment – temporarily unemployed. Qualified with transferable skills but they aren't working. Seasonal unemployment – this is a specific type of frictional unemployment which is due to time of the year and the nature of the job. These jobs will come back. Structural unemployment- changes in the structure of the labor force make some skills obsolete. Workers don't have transferable skills and these jobs will never come back. Workers must learn new skills. The permanent loss of these jobs is called "creative destruction”. Cyclical – results from economic downturn's (recessions). As demand for goods and services falls demand for labor falls and workers are fired.
• ⅔ of unemployment are unavoidable: frictional, structural
• Together they make the NRU(natural rate of unemployment)
• We are at full employment if we only have 4–5% unemployment(NRU)
• Okun’s law- . when unemployment rises 1% above natural rate, GDP falls by about 2%

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INFLATION

• Inflation – general rise in the price level. It reduces "purchasing power" of money
• Purchasing power – amount of goods and services that money buys
• I deal inflation rate is 2 to 3%
• Three causes of inflation: printing too much money, demand pull inflation (too many dollars chasing too few goods. Demand increases but supply stays the same. Result is a shortage driving prices up. An overheated economy with excessive spending but same amount of goods), cost push inflation(higher production cost increases prices)
• Inflation formula – 100 X current year price index - previous year price index/previous year price index
• Deflation – decline in the general price level
• Disinflation – this occurs when the inflation rate itself declines
• Rule of 70 – used to calculate the number of years it will take for the price level to double at any given rate of inflation. Formula: 70/annual rate of inflation
• Real interest rate – amount of money that is borrowed. The percentage increase in purchasing power that a borrower pays to the lender(adjusted for inflation) formula: nominal interest rate - expected inflation
• . Nominal interest rate – the percentage increase in money that the borrower pays back to the lender. Not adjusting for inflation.
• Hurt by inflation – lenders (people who lend money), people who are on a fixed income, savers
• Helped by inflation- borrowers (people who borrow money),business where the price of the product increases faster than the price resources

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