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Understanding Unemployment: Measurement, Calculation, and Economic Impact

This module provides an in-depth look at unemployment, emphasizing its measurement and significance in the economy. Students will learn how the unemployment rate is calculated and the importance of understanding labor force statistics. Discussion includes the relationship between unemployment rates and economic growth, as well as the effects of underemployment and discouraged workers. By equipping students with these insights, they will gain a clearer understanding of macroeconomic trends and the indicators that signal economic health, including the cyclical nature of GDP and unemployment.

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Understanding Unemployment: Measurement, Calculation, and Economic Impact

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  1. AP Economics Mr. Bernstein Module 12: The Meaning and Calculation of Unemployment February 19, 2014

  2. AP EconomicsMr. Bernstein The Meaning and Calculation of Unemployment • Objectives - Understand each of the following: • How unemployment is measured • How the unemployment rate is calculated • The significance of the unemployment rate for the economy • The relationship between the unemployment rate and economic growth

  3. AP EconomicsMr. Bernstein

  4. AP EconomicsMr. Bernstein

  5. AP EconomicsMr. Bernstein Defining and Measuring Unemployment • BLS produces statistics: http://www.bls.gov/bls/unemployment.htm • The population is divided into three groups: Working at least one hour (Employed), not working but seeking work (Unemployed) and those “not in the labor force” • Labor Force LF = Employed + Unemployed • Labor Force Participation Rate LFPR = 100 * LF / (civilian population 16 or older) • Unemployment Rate UR = 100 * # Unemployed / # Labor Force

  6. AP EconomicsMr. Bernstein Significance of the Unemployment Rate • Indicator of the Ebb and Flow of the Macroeconomy (Circular Flow) • Can understate true unemployment • Reduced hours • Underemployment • Discouraged workers (not in labor force) • Affects different groups disproportionally

  7. AP EconomicsMr. Bernstein Unemployment and Growth • What is relationship between GDP and UR? • Consider Recessions, Expansions • GDP can be negative. How low can UR go?

  8. AP EconomicsMr. Bernstein Unemployment and Growth • GDP rises when UR falls

  9. AP EconomicsMr. Bernstein Unemployment and Growth • UR rises when GDP falls

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