UNIT 2: Unemployment 2/4/16

Unemployment - Failure to use available resources, labor, to produce desired goods and services

The Labor Force includes those above 16 and able and willing to work. (Employed + Unemployed)

The Labor Force does not include:

• Military
• Students
• Retired 
• Disabled
• Stay at home people/ Home makers
• People in Mental Institutions
• People in Jail or Prison
• Those not looking for a job

Unemployment rate: 4-5% is considered "ideal" or as Full Employment, or the Natural Rate of Unemployment.

To Calculate Unemployment rate:

Unemployed
Labor Force       * 100

The 4 Types of Unemployment


Frictional + Structural = NRU

Full Employment = no cyclical unemployment, Cyclical unemployment is bad!

A GDP Gap is the amount that the actual GDP falls short of potential GDP.

Okun's Law states that for every 1% the actual unemployment rate exceeds the NRU the GDP gap is about 2%.

Rule of 70 is used to detemine how many years it takes for a value to double on a set rate.

70
Interest   =  # of years

Ex. If you put $20,000 in a bank, an it earns a yearly interest of 7%, how many years will it take for that amount to double?

70
7%        =    10 years