1 / 17

Chapter 8:

Chapter 8:. Fiscal Policy: Coping with Inflation & Unemployment. 3/11/2014. AS. Price Level. P 2. P 3. AD 2. P 1. AD 3. AD 1. 0. Y 1. Y 2. Aggregate Output. Different Types of Unemployment:. Frictionally Unemployed Structurally Unemployed Cyclically Unemployed

giselle
Télécharger la présentation

Chapter 8:

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 8: Fiscal Policy: Coping with Inflation & Unemployment 3/11/2014

  2. AS Price Level P2 P3 AD2 P1 AD3 AD1 0 Y1 Y2 Aggregate Output

  3. Different Types of Unemployment: • Frictionally Unemployed • Structurally Unemployed • Cyclically Unemployed • Discouraged Workers • Underemployed Workers

  4. 1. Frictionally Unemployed: Relatively brief periods of unemployment caused by people deciding to voluntarily quit work in order to seek more attractive employment. 2. Structurally Unemployed: Unemployment that results from fundamental technological changes in production, or from the substitution of new goods for customary ones.

  5. 3. Cyclically Unemployed: Unemployment associated with the downturn and recession phases of the business cycle. 4. Discouraged Workers: Unemployed people who give up looking for work after experiencing persistent rejection in their attempts to find work.

  6. 5. Underemployed Worker: Workers employed in jobs that do not fully utilize their productive talents or experience.

  7. Number of Workers and Type of Unemployment: Total Unemployment = 150 + 200 + 500 + 250 + 300 = 1,400 True Unemployment Rate =

  8. The Bureau of Labor Statistics (BLS): Two Questions: Q1. Are you presently gainfully employed? Q2. Are you actively seeking employment?

  9. Number of Workers and Type of Unemployment: – 250 Labor Force = 10,250 = 10,000 Actual Unemployment Rate =

  10. BLS’s Rate of Unemployment Actual Unemployment Rate = 8.5% 150 + 200 Natural Rate of Unemployment = = 3.5% 10000 Actual Rate of Unemployment = Natural Rate of Unemployment + Cyclical Rate of Unemployment 8.5% = 3.5% + 5%

  11. AS Price Level P2 P3 AD2 P1 AD3 AD1 0 Y2 Y1 Aggregate Output

  12. Winners and Losers from Inflation: Who Loses from Inflation? • People on fixed income • Lenders • Savers

  13. Who Gains from Inflation? • Borrowers • Government Moderating the Wins and Losses: Variable Rate of Interest Cost of Living Index (COLA)

  14. AEa $ AE100 Recessionary Gap 0 800 1200 Y Price Level 105 100 AD 800 1200 Y

  15. Recessionary Gap: The amount by which aggregate expenditure falls short of the amount needed to generate full employment national output.

  16. AEb AEa $ Inflationary Gap 0 1200 1600 Y Price Level 133 105 AD 1200 1600 Y

  17. Recessionary Gap: The amount by which aggregate expenditure falls short of the amount needed to generate full employment national output. Inflationary Gap: The amount by which aggregate expenditure exceeds the level needed to generate full employment national output.

More Related