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Economics Final
| Question | Answer |
|---|---|
| What is the Labor Force? How is it calculated? | Consists of people who are employed and unemployed. (=employed + unemployed) |
| What is the Unemployment Rate? How is it Calculated? | The percentage of people in the labor force that don;t have jobs but are actively seeking work. =[Unemployed/(Unemployed + Employed)] |
| What are the shortcomings of the Unemployment rate? | Underestimates the true rate by: -Not counting discouraged workers -Counting involuntarily part time employees -Ignores labor underutilization (people with high qualifications take up low-skilled jobs due to lack of jobs) |
| What is the classical market's approach to employment? | Presumes employment is determined by the supply and demand for workers |
| What is the classical market's predictions on the unemployment rate? | The classical labor market is free to adjust according to the "forces of supply and demand" --- Therefore, there is no involuntary unemployment: everyone who wants a job, gets a job. |
| What is Keynesian Unemployment? Why is there unemployment from the Keynesian viewpoint? | Keynesian unemployment is unemployment due to a lack of spending (a lack of aggregate demand). |
| What would Keynes say happens when wages are reduced? | If we lower wages, we lower spending. |
| What is the business cycle? | Cycle that measures Output (GDP), the rate of unemployment, and the rate of inflation over a certain period of time. |
| How do Output, Unemployment, and inflation behave on the course of a business cycle? |
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