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Cartes-fiches
What is Frictional Unemployment
- People entering and leaving the labour force (Time between being in school, to finding a job)
- Ongoing creation and destruction of jobs (Find good person after created a job)
- permanent and healthy phenomenon in a dynamic growing economy
- 3%
Cyclical Unemolyment
- Insuffisent demand from Firms and Govrment.
- Economic is in Rezession and needs less workers.
- 0.5%
Structural Unemployment
- Arises when changes in technology or international competition change. Skills needed to perform jobs or change the locations of jobs
- Lasts longer than frictional becaus workers must retrain and relocate to find a job.
- Industry Basis
- Longterm Frictional
- 3%
Natural unemployment
- All the unemplyment is caused frictional and structural - no cyclical
- Full emplyment = unemplyment rate equals the natural unemplyment rate
- Influanced by
- Age distribution of the population ( young population -> large number of new job seekers -> hight level of frictional unemplyment)
- scale of structural change (technological change -> machine instead of workers)
- the real wage rate (effektiv lohn)
- unemplyment benefits (extending unemplyment benefits increases the natural unemployment rate)
How to reduce Urate (Frictional and Structural
- Jobmarket information
- Retraining and Relocation
- Tightening Emplyment and Insurance Benefits
How to reduce Urate (Cyclical)
- Monetary Policy
- Stimulate Demand for Goods and Supplies
- Moneysupply up -> interest down -> Consumation and Investments up
- Stimulate Demand for Goods and Supplies
- Fiscal Policy (changes in Goverments budget
- Cut taxes or increase it's spending -> runs a budget defisit
- If it borrows dollar so increase of national debts
- Cut taxes or increase it's spending -> runs a budget defisit
GDP
- Gross Domestic Product (Brutto Inland Produkt)
- Measures the national income
- The total value of goods and services produced in the economy during a given period
CPI
- Consumer Price Index
- Measures the average of the prices paid by urban consumers for a fixed basket of conumer goods and services.
- Tells us about the value of the money in our pocket.
- Select CPI Basket: Survey the monthly Price; Calculate CPI
- We can calculate the Inflationrate -> (CPI this year - CPI last year ) / CPI last year
Four Key Economic Problems
- What is produced and how? Allocation of scarce (knappheit) resources among alternative uses.
- What is consumed and by whom?
- Why are resources sometimes idle (Leerlauf)?
- Is productive Capacity growing?
Productive resources
- LD -> Natural Resources
- L -> Labour
- K-> Capital
Fullemployment unemploymentrate is when?
The lowest we can get the unemplymentrate without causing inflation to accelerate.
-> Hire people to produce more -> rises prices -> inflation
Natural rate of unemplyment: NAIRU -> Non-accelerating-inflation-rate of unemplyment
What is Labour force
working people and people searching work
Persons age 15+ who are working or actively seeking work. LB is affected by changes in the participation rate in %.
Market rate of interest
Inflation Rate + Risk premium + Real rate
3%+5%12%= Market rat of interest -> 10%
Difference noinal interest rate and real interest rate
Nominal interest rate: The price paid per dollar borrowed per period of time
Real interest rate: The nominal rate of interest adjusted for the change in the purchasing power of money. Equal to the nominal interest rate minus the rate of inflation
Exchange rate
depreciation(Wertverlust) / appreciation
The echange rate is the number of Candaian dollars required to purchase one unit of foreign currency
If C$ increases so FER decreases; Export decreases; Import increases
FER= 1/0.75= 1.33
depreciation: A rise in the exchange rate - it takes more units of domestic currency to purchase one unit of foreign currency
appreciation: A fall in the exchange rate
Aggregate Expenditures (AE)
What happens if AE decreases?
Consumption + Investment + Government purchase + Export- Import
Demand for goods and supplies decrease, production decreases, national income decreases and U rate increases
Changes in AE affects changes in RNI and U rate
Will the rise of market interest rate slow down the market?
It depends on the real interest rate. If real interest rates dicreases so no. If real interestrate increases so yes.
Circular Flow of income
Withdrawls (W)-> Savings, Taxrs, Import
Infections (J) -> Investments, Governments spendings, Export
If W>J economic will slowdown
If W=J RNI stays same
If W<J RNI increases; output rising
Difference GDP and GNP
GDP: Measures the value of all production located in Canada, no matter who receives the income from that production. Income produced. Is superior as a measure of domestic economic activity.
GNP: Measures the income received by Canadian residents, no matter where the produciton occured to generate that income. Income received. Is superior as a measure of living standards of residents.
Toyota cars produced in Canada contribute to Canada's GDP. But the portion of profits that returns to foreign shareholders in not part of Canada's GNP.
GDP from the expenditure side vs. GDP from the income side
Expenditure: C+ I+ G+ X-M= Total GDP
Income: Factor Incomes( Wages, Interest, Business profits)+ Non-factor Payments ( Depreciations, Ind. Taxes)= GDP
Three methods for measuring national income (Output; GDP)
- Total value added from domestic production
- Total expenditures on domestic output (expenditure approach)
- Total income generated by domestic production (income approach)
GDP Deflator
Nominal vs Real GDP
Comparison of nominal and real GDP, index of average price of all goods and services produced in economy.Is a ver comprehensive index of prices because it includes the prices of all goods and services produce in the country. Price index for the whole economy.
Nominal GDP/ Real GDP * 100
Nominal GDP: GDO valued at current prices
Real GDP: GDP valued at base-period prices.
If not the same so prices must have changed over the period.
What does desired really mean?
Desired expenditure is what consumers and firms would like to purchase, given their real- world constraint of income and market prices.
Shifts in the consumption function.
What increases?
Increase in wealth, decrease in interest rate, increase in optimism.
45grad-line= AE=Y
AE=C+I+G+X-M= Desired actual