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TER
5
Macroeconomics:
Unemployment
Prepared by:
Prepared
by: Eduard
Fernando Quijano
Mr.
R. Chua
and Yvonn Quijano
C H A P T E R 17: Introduction to
Macroeconomics
Opening Prayer
Our Father,
You bestow upon us your infinite Grace.
We are grateful for your perpetual kindness.
Please shower us with wisdom as we go through
todays lesson.
We ask this through Jesus Christ. Amen.
C H A P T E R 17: Introduction to
Macroeconomics
Vocabulary Drill
C H A P T E R 17: Introduction to
Macroeconomics
Review
C H A P T E R 17: Introduction to
Macroeconomics
C H A P T E R 17: Introduction to
Macroeconomics
Introduction
During the recession that began in 2007, the number of
unemployed people in the United States rose by more
than 4 million.
Of the 11 million unemployed people at the end of 2008,
half were job losers, people who lost their jobs
involuntarily.
During the Great Depression, the unemployment rate
rose much more, reaching an all-time high of 25 percent
in 1933.
C H A P T E R 17: Introduction to
Macroeconomics
C H A P T E R 17: Introduction to
Macroeconomics
Underemployed
People who are compelled to work shorter hours
than they would like to.
Disguised Underemployment
Hidden Unemployment
Prematurely Retired
C H A P T E R 17: Introduction to
Macroeconomics
Disguised Underemployment
A trick used by some countries in order to curb
down unemployment statistics.
Workers are hired for the sake of disguising the
unemployed as employed.
C H A P T E R 17: Introduction to
Macroeconomics
Hidden Underemployment
Refers to cases wherein people who are engaged
in non-employment activities do so not because
they want to but because they are unable to find
jobs suited to them. (e.g. housewives or
students)
C H A P T E R 17: Introduction to
Macroeconomics
Prematurely Retired
A practice mostly observed in government
institutions.
The government may ask some people to retire at
an earlier age to give way to the younger ones
who are seeking employment.
C H A P T E R 17: Introduction to
Macroeconomics
Okuns Law
States that for every 2 percent that GDP falls
relative to potential GDP, the unemployment rate
rises about 1 percentage point.
Provides the vital link between the output market and
C H A P T E R 17: Introduction to
Macroeconomics
Informal Sector
Consists of hawkers, street vendors, sari-sari
store owners, pedicab drivers, etc. who are
usually self-employed.
Provides cheaper sources of food, goods, and
C H A P T E R 17: Introduction to
Macroeconomics
Equilibrium Unemployment
Arises when people become unemployed voluntarily
as they move from job to job or into and out of the
labor force.
Sometimes called frictional unemployment because
people cannot move instantaneously between jobs.
A worker at a 24/7 convenience store might decide that
the pay is too low, or the hours are too inconvenient, and
quit to look for a better job.
2004 Prentice Hall Business Publishing
C H A P T E R 17: Introduction to
Macroeconomics
Disequilibrium Unemployment
Occurs when the labor market or the
macroeconomy is not functioning properly and
some qualified people who are willing to work at
the going wage cannot find jobs.
Sometimes called involutarily unemployed
Structural unemployment
Cyclical unemployment
C H A P T E R 17: Introduction to
Macroeconomics
Structural Unemployment
Signifies a mismatch between the supply of and
the demand for workers.
An acute shortage of nurses arose recently as the
C H A P T E R 17: Introduction to
Macroeconomics
Cyclical Unemployment
Exists when the overall demand for labor
declines in business-cycle downturns.
In the major recession of 2007-2009, the demand for
C H A P T E R 17: Introduction to
Macroeconomics
Economic Impact
When the unemployment rate goes up, the economy
is in effect throwing away the goods and services
that the unemployed workers could have produced.
The largest economic loss occurred during the
Great Depression. ($ 2.796 T est.)
The oil and inflation crises of the 1970s and 1980s
also generated more than a trillion dollars of lost
output. ($ 1.694 T est.)
C H A P T E R 17: Introduction to
Macroeconomics
Social Impact
No dollar figure can adequately convey the
human and psychological toll of long periods of
persistent involuntary unemployment.
The personal tragedy of unemployment has been
proved again and again.
C H A P T E R 17: Introduction to
Macroeconomics
C H A P T E R 17: Introduction to
Macroeconomics
Recollection of an
Unemployed Construction Worker
I called the roofing outfits and they didnt need me because they
already had men that had been working for them five or six
years. There wasnt that many openings. You had to have a
college education for most of them. And I was looking for
anything, from car wash to anything else. So what do you do all
day? You go home and you sit. And you begin to get frustrated
sitting home. Everybody in the household starts getting on
edge. They start arguing with each other over stupid things
cause theyre all cramped in that space all the time. The whole
family kind of got crushed by it.