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econ 203 ch9-11
| Term | Definition |
|---|---|
| A person is considered employed if... | he or she spent some time of the previous week working at a paid job |
| A person is considered unemployed if.... | they are on temporary layoff or looking for a job |
| labour force | the total number of workers, including both the employed and unemployed |
| people not included in the labour force are | full time students, homemakers and retirees |
| employment rate | total # of employed/ labour force |
| discouraged searchers | individuals who would like to work but have given up looking for a job |
| is an involuntary part-timer considered employed? why or why not | they are unemployed, because they are still searching for a full time job in the labour force |
| natural rate of unemployment | the rate of unemployment to which the economy tends to return in the long run. about 6-8% in Canads |
| cyclical unemployment | the deviation of unemployment from its natural rate |
| frictional unemployment | unemployment that results because it takes time for workers to find jobs that suit their tastes and skills |
| structural unemployment | unemployment that results because there are not enough jobs avalible |
| causes of structural unemployment | minimum wage above equilibrium, unions and efficiency wages |
| efficiency wages | above-equilibrium wages paid by firms in order to increase worker productivity |
| union | a worker association that bargains with employers over wages and working conditions |
| collective bargaining | the process by which unions and firms agree on the terms of employment (work conditions, better benefits , higher wages) |
| how do unions cause unemployment? | when a union raises the wage above eqm level, it raises the quantity of labour supplied and reduces the quantity of labour demanded |
| how does a high minimum wage cause unemployment? | it reduces the quantity of labour demanded and increases the quantity of labour supplied. minimum wage laws usually affect teenagers because they are the ones most likely to be paid minimum wage |
| worker health (efficiency wage theory) | better paid workers eat a more nutritious diet, and healthy workers are more efficient. this mainly applies to less developed countries |
| worker turnover (efficiency wage theory) | the more a firm pays its workers, the less often workers will leave the job. it is costly for firms to hire and train new workers. existing workers are more productive than new hires |
| worker effort (efficiency wage theory) | high wages make workers more eager to keep their jobs. if they were at a lower wage, it would be easy to find another job at the same wage. the higher the wage, the harder it is to find a new job at the same rate |
| worker quality (efficiency wage theory) | when a firm pays a high wage, it attracts a better pool of workers and thereby increases the quality of the workforce |
| why is the unemployment rate an imperfect measure of joblessness? | some people who call themselves unemployed may not want to work, there are some who would like to work have left the labour force after an unsuccessful search and there are people who work "under the table" |
| how is unemployment measured? | every month, statistics Canada conducts a labour force survey. data is collected on: unemployment, employment, length of workweek, duration of unemployment |
| employment insurance | a government program that partially protects workers' incomes when they become unemployed. EI may reduce the hardship of unemployment, but the design of the program influences workers behaviour in a negative way, causing unemployment to increase |
| money | the set of assets in the economy that people regularly use to buy goods and services from other people |
| moneys 3 functions are | it is a medium of exchange, a unit of account, and a store o f value |
| medium of exchange | an item that buyers give to sellers when they want to purchase a good or service |
| unit of account | the yardstick people use to post prices and record debts |
| liquidity | the ease at which an asset can be converted into the economy's medium of exchange |
| commodity money | has intrinsic value, it has value even if it''s not used as money. ie gold |
| fiat money | money without intrinsic value that is used as money because of government decree ie. Canadian bills vs monopoly bills |
| currency | paper bills and coins in the hands of the public |
| demand deposits | balances in bank accounts that depositors can access on demand by writing a cheque or using a debit card |
| M1 | currency and cheqable deposits (more liquid) |
| M2 | M1 + nonpersonal demand and notice deposits (less liquid) |
| Central bank | an institution designed to regulate the quantity of money in the economy |
| commercial bank | owned by individual shareholders. their job is to maximize profits they earn |
| monetary policy | the setting of the money supply by policymakers in the central bank |
| 4 jobs of the Bank of Canada | issue currency, act as a banker to the commercial banks, act as a a banker to the Canadian government, control the money supply |
| reserves | deposits that banks have received but not loaned out |
| Money multiplier | the amount of money the banking system generates with each dollar it receives. The money multiplier is the reciprocal of the reserve ratio (1/R) |
| bank capital | the resources the bank owners put into an institution from issuing equity (ie stock) |
| leverage | the use of borrowed money to supplement existing funds for purposes of investment |
| leverage ratio | ratio of assets to bank capital |
| capital requirement | a government regulation specifying a minimum amount of bank capital |
| bank rate | the interest rate charged by the BoC on loans to the commercial banks |
| overnight rate | the interest rate on very short term loans between commercial banks |
| open market operations | the purchase or sale of government of Canada bonds by the BoC |
| quantatative easing | the purchase and sale by the central bank of nongovernment securities or government securities with long maturity terms (increases capital) |
| foreign exchange market operations | the purchase or sale of foreign money by the Boc |
| sterilization | the process of offsetting foreign exchange market operations with open market operations, so that the effect on the money supply is cancelled out |
| reserve requirements | regulations on the minimum amount of reserves that banks must hold against deposits |
| nominal variables | variables measured in monetary units |
| real variables | variables measured in physical units |
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