1. What is the measure of joblessness in the United States economy?

Unemployment rate

Definition of unemployed: people available for work who made a specific effort to find a job during the past month

Things to consider about the unemployment rate:

Does not account for ‘dropouts’, which are people who have become frustrated or discouraged with searching for a job and have stopped looking for work

A person is considered employed even if they were paid for only one hour of work

2. What are the five types of unemployment?

a. Frictional unemployment – workers who are between jobs

b. Structural unemployment – economic changes make certain workers unnecessary

c. Cyclical unemployment – related to the swings of the business cycle

d. Seasonal unemployment – related to changes in weather, economic demands, etc.

e. Technological unemployment – when low-skilled workers are replaced by machines

https://www.youtube.com/watch?v=ZckAN1KYB5I

5. What causes technological unemployment?

Automation: production with mechanical or other processes that reduces the needs for workers

6. What level of unemployment do most economists consider to be full employment?

Below 5% unemployment

1. What is inflation?

A rise in the general price level

2. What are three degrees of inflation, from least to most severe?

a.Creeping inflation: 1-3% per yearb.Galloping inflation: 100-300% per year

Can happen in developing countries, e.g., Latin American countries

c.Hyperinflation: 500%+ per year

3. What are five explanations for the cause of inflation?

a. Demand-Pull Theory – When demand from all sectors of the economy for goods and services is higher than what the economy can produce

b. Government Deficit – deficit – government spending in excess of taxes and other revenues – increase of prices is due to government overspending

e. Excessive Monetary Growth – When money supply grows faster than GDP, more money is spent on goods, which triggers a demand-pull effect that increases prices

c. Cost-Push – When labor groups increase the wages of employees via negotiation, price of manufacturing increases, which causes higher prices

d. Wage-Push Spiral – If employers are required to raise wages, they may try to recover increased costs by increasing prices, endless cycle

4. What are four ways that inflation destabilizes the economy?

a. Dollar buys less – especially impacts the purchasing power for people on fixed incomes (elderly, etc.)

b. Spending habits change – prices increase to a point where consumers buy other goods -> that company produces less -> unemployment for those employees

c. Speculation increases – buying diamonds, art, or other exotic items as investments – removes money from the economy which could lead to structural unemployment d. Distribution of income is altered: debtors benefit over creditors (inflation vs. interest rate)

5. Why is inflation especially hard on those people with fixed incomes?

Inflation reduces the purchasing power of the dollar, which means the purchasing power of the fixed income will decrease.

1. What is the purpose of the Lorenz curve?

The Lorenz curve shows how the actual distribution of income varies from an equal distribution of income

What are five reasons that income is not distributed equally in the United States?

a. Education – More education generally means better paying jobs, not accessible or equal for everyone

b. Wealth distribution – 75% of wealth owned by the top 10% wealthiest peoplec. Discrimination – drives women and minorities into oversupplied and lesser-paid labor markets

d. Ability – unique natural talents that allow some people more success than others (e.g., sociable, aggressiveness, tenacity, persuasive speaker, cutthroat, etc.)

e. Monopoly Power – when certain groups hold almost complete control over specific job types (e.g., American Medical Association and limiting medical school students)

Blue-collar worker – factory or industry worker, more generally, a working class person who performs manual labor

White-collar worker - a person who performs professional, managerial, or administrative work. For example, office worker, doctor, teacher

Note: Below contains additional info that is on the test. You should write this info at the bottom of your Section 3 page or any other place. Honestly it does not matter as long as you remember these two terms.

3. What is the poverty threshold?

The annual dollar benchmark used to determine whether a family is in poverty or not