STUDY UNIT 8 Flashcards
(17 cards)
what is the unemployment rate?
it is the ratio of the unemployed to the labour force
what is the strict definition of unemployment?
the people within the economically active population who:
- did not work during 7 days prior to the interview
- want to work and avaiable to start within a week of the interview
3, have taken active steps to look for work or to start some form of self-employment in four weeks prior to the interview
what is the expanded definition of unemployment?
discouraged job seekers , in other words, those who said they were unemployed but had not taken active steps to find work in four weeks prior to the interview
how are wages are set?
by collective bargaining (bargaining between firms and unions) by employers and by bargaining between the employer and individual employees
what happens when there’s a higher price level and the nominal wage unchanged?
a higher price level implies that goods and services are more expensive and, if your nominal wage is unchanged , the real wage declines
what relationship between the expected price level and nominal wage demands?
positive relationship
Pe increases-> W increases
Pe decreases-> W decreases
what happens when the unemployment rate increases?
a recession occurs, the bargaining position of workers decreases and the lower their wage decreases.
what’s the relationship between the unemployment rate and wage?
u increases-> W decreases
u decreases-> W increases
what are examples of institutional factors?
- unemployment insurance or benefits to workers who lose their jobs
2.minimum wages
- labour laws and regulations that employment
- collective bargaining
what’s the wage equation?
W= PeF(u;z)
+ -; +
z (institutional factors)
what relationship does nominal wage have with the price per unit?
a positive one
what is the price equation?
P= (1+m)W
+; +
What relationship does the price per unit have with the markup (m)
a positive relationship
m increase-> P increases
m decreases-> P decreases
what is the wage/price equation?
W/P= F(u, z)
-, +
what is implied or feasible real wage?
real wage that is paid to labour
how is the 1/1+m in the W/P equation represented on a graph
a horizontal line because it is not affected by the unemployment rate
what are the two things that causes a higher real wage?
markups decreases which causes a lower price level will occur and a higher real wage will occur. this is referred to as the battle for the mark-ups
if productivity increases, if more goods are produced per unit of labour, then more goods are available to be divided between firms and labour
