ECON ch 14- EXAM #1 Flashcards Preview

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Flashcards in ECON ch 14- EXAM #1 Deck (19):
1

the number of employed people (EP) and unemployed people (UP)

the labor force (LF)

2

labor force equation

LF= E+U

3

U-Rate equation

UP/LF x100

4

a person must actively be out of a job and currently looking for one

unemployed

5

the portion of unemployment that is due to the normal working of the labor market (used to denote SR job/skill matching problems)

frictional unemployment

6

the portion of the unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries

structural unemployment

7

the increase in unemployment due to recessions

cyclical unemployment

8

quantity of labor employed in the economy

the quantity of workers

9

wage rate=

the price of labor

10

a graph that illustrates the amount of labor that households are willing to supply at each given wage rate

labor supply

11

a graph that illustrates the amount of labor that firms are willing to employ at each given wage rate

labor demand

12

classical theory holds that

all markets clear

13

labor market clear=

a decline in demand for labor will be followed by fall in wage rates
-the equilibrium will be restored at a lower wage rate
-at lower wage, everyone who wants a job will have one

14

a decline in demand for labor does not necessarily mean that unemployment will rise

classical view

15

did keynes agree with classical theory

no

16

why did keynes not agree with the classical theory

wage stickyness= wage rate (price of labor) is sticky downwards

17

a decline in demand for labor with a sticky wage rate will create unemployment

keynes theory that labor market does not clear
-gap between the number of people willing to work at the existing wage rate and the number of people firms are willing to employ at the existing wage rate

18

what determines the wage stickiness? (5)

1. social, or implicit, contracts
2. explicit contracts
3. cost of living adjustments
4. efficiency wage theory
5. min wage laws

19

why the labor market is not clear is

still an open question