Topic 3.3 Flashcards
(32 cards)
Three macroeconomic objectives
- Low and stable inflation rate
- low unemployment
- stable economic growth
Economic Growth
when an economy produces more goods and services than in a previous period (Increase in GDP)
Short term economic growth
increase in the actual output caused by reduction of unemployment and production inefficiencies
PPC
production possibilities curve: represents size of economy if all resources are fully employed
Short term growth vs long term growth
PPC shifts outwards in long term; movement within PPC curve for short term
Natural Resources
ecological/land resources which are marketable commodities
Effect of economic growth on
Living standards
- increases people’s incomes
- causes negative externality of production (pollution)
Effect of economic growth on
Environment
- more opportunity to spend on conservation/protection of environment
- Reduces sustainability due to resource use
Developed countries more likely to conserve/protect environment
Effect of economic growth on
Income Distribution
- Wealth concentration allows investment in means of production, increases economic growth, leads to more opportunities/higher levels of employment
- income not distributed equitably
Lower income have less disposable income, higher have more
What is the definition of
Unemployed
when a person is actively seeking employment but unable to find it
Must be actively looking
What is the definition of
Labour force
all people aged 18-65 who can be unemployed or employed
must be in the labour market, looking for/have jobs
What is the definition of
unemployment rate
the percentage of the labour force that is unemployed
What are the
Difficulties of measuring unemployment
H: hidden unemployment (people whose skills are not fully utilized)
I: informal economy (people being paid underage or unrecorded)
R: regional/age/gender (doesn’t account for racism sexism)
D: discouraged workers (depressed people don’t actively seek jobs)
Accronym: HIRD (haha)
What are the
2 major types of unemployment
disequilibrium unemployment
- when the labour market is in diseqm, but goods market is in eqm
equilibrium unemployment
- result of changing workforce patterns resulting in new eqm in the labour market
What is the definition of
Natural rate of unemployment
% of people unemployed for structrual, frictional, and seasonal reasons
Definition
Cyclical unemployment
occurs when lack of AD forces firms to make workers redundant
- cause of business cycle
Def
Real wage unemployment
the difference between the supply and demand of jobs
- ex. minimum wage causes surplus of labor (nobody wants more)
def
Frictional Unemployment
when people are between jobs or school and a job
also when contracts end
Def
Seasonal unemployment
occurs when employment is season-specific
ex. ski, gardener, christmas
def
Strucrtural unemployment
occurs when mismatch of supply/demand for labour skills
Reasons for structural unemployment
- when companies relocate to other countries, workers don’t move w them
- labour market rigidity
- How hard it is to get certified for a job, ex. teachers
List
Economic costs of unemployment
MILLL
M: more income inequality
I: increased cost of unemployment benefits (for govt)
L: Loss of GDP
L: Loss of income
L: Loss of govt tax revenue
List
Personal costs of unemployment
- Increased debt, homlessless, family breakdown
- increased stress
Social Costs of unemployment
- increased crime rates
- increased health risks
