Notes (2/3/15)- Unemployment

Unemployment: percentage of people who do not have jobs but are in the labor force

• Labor Force
• number of people in a country that are classified as either employed or unemployed
• Unemployment rate: # of unemployed / # of unemployed + # employed * 100
• Not In Labor Force
1. Kids
2. Retired people
3. Military personal
4. Mentally insane
5. Incarcerated
6. Stay at home parents
7. Full time students
8. Discouraged workers
• Full Employment
• occurs when there is no cyclical unemployment present in the economy
• natural rate of unemployment (NRU): another name for full employment
• 4% to 5%
• Why is unemployment good?
1. because there is less pressure to raise wages
2. more workers are available for future expansions
• Why is unemployment bad?
1. not enough consumption
2. too much poverty
3. too much government assistance needed
• Okun's Law
• for every 1% of unemployment above the NRU causes a 2% decline in real GDP