PRINCIPLES OF MACROECONOMICS PART II Concepts and Problems in Macroeconomics TENTH EDITION CASE FAIR OSTER © 2012 Pearson Education, Inc Publishing as Prentice Hall Prepared by: Fernando Quijano & Shelly ofTefft 28 PART II Concepts and Problems in Macroeconomics © 2012 Pearson Education, Inc Publishing as Prentice Hall of 42 Unemployment, Inflation, and Long-Run Growth CHAPTER OUTLINE Unemployment Measuring Unemployment Components of the Unemployment Rate The Costs of Unemployment PART II Concepts and Problems in Macroeconomics Inflation © 2012 Pearson Education, Inc Publishing as Prentice Hall The Consumer Price Index The Costs of Inflation Long-Run Growth Output and Productivity Growth Looking Ahead of 42 Unemployment Measuring Unemployment PART II Concepts and Problems in Macroeconomics employed Any person 16 years old or older (1) who works for pay, either for someone else or in his or her own business for or more hours per week, (2) who works without pay for 15 or more hours per week in a family enterprise, or (3) who has a job but has been temporarily absent with or without pay unemployed A person 16 years old or older who is not working, is available for work, and has made specific efforts to find work during the previous weeks © 2012 Pearson Education, Inc Publishing as Prentice Hall of 42 Unemployment Measuring Unemployment not in the labor force A person who is not looking for work because he or she does not want a job or has given up looking PART II Concepts and Problems in Macroeconomics labor force The number of people employed plus the number of unemployed labor force = employed + unemployed population = labor force + not in labor force © 2012 Pearson Education, Inc Publishing as Prentice Hall of 42 Unemployment Measuring Unemployment unemployment rate The ratio of the number of people unemployed to the total number of people in the labor force PART II Concepts and Problems in Macroeconomics unemployment rate = unemployed employed + unemployed labor force participation rate The ratio of the labor force to the total population 16 years old or older labor force participation rate = © 2012 Pearson Education, Inc Publishing as Prentice Hall labor force population of 42 PART II Concepts and Problems in Macroeconomics A person not looking for work, because he or she either does not want a job or has given up looking, is classified as: a Unemployed b Not in the labor force c In the labor force but not currently employed d In the labor force participation rate, but not in the labor force © 2012 Pearson Education, Inc Publishing as Prentice Hall of 42 PART II Concepts and Problems in Macroeconomics A person not looking for work, because he or she either does not want a job or has given up looking, is classified as: a Unemployed b Not in the labor force c In the labor force but not currently employed d In the labor force participation rate, but not in the labor force © 2012 Pearson Education, Inc Publishing as Prentice Hall of 42 Unemployment Measuring Unemployment TABLE 7.1 Employed, Unemployed, and the Labor Force, 1950–2009 (1) PART II Concepts and Problems in Macroeconomics Population 16 Years Old or Over (Millions) (2) Labor Force (Millions) (3) (4) (5) (6) Employed (Millions) Unemployed (Millions) Labor Force Participation Rate (Percentage Points) Unemployment Rate (Percentage Points) 1950 105.0 62.2 58.9 3.3 59.2 5.3 1960 117.2 69.6 65.8 3.9 59.4 5.5 1970 137.1 82.8 78.7 4.1 60.4 4.9 1980 167.7 106.9 99.3 7.6 63.8 7.1 1990 189.2 125.8 118.8 7.0 66.5 5.6 2000 212.6 142.6 136.9 5.7 67.1 4.0 2009 235.8 154.1 139.9 14.3 65.4 9.3 Note: Figures are civilian only (military excluded) © 2012 Pearson Education, Inc Publishing as Prentice Hall of 42 Unemployment Components of the Unemployment Rate Unemployment Rates for Different Demographic Groups TABLE 7.2 Unemployment Rates by Demographic Group, 1982 and 2010 PART II Concepts and Problems in Macroeconomics Years Total White Men Women Both sexes African American Men Women Both sexes © 2012 Pearson Education, Inc Publishing as Prentice Hall 20+ 20+ 16–19 20+ 20+ 16–19 November 1982 June 2010 10.8 9.6 9.0 8.1 21.3 9.5 8.6 8.9 7.1 23.2 20.2 19.3 16.5 15.4 17.4 11.8 49.5 39.9 10 of 42 ... Hall of 42 Unemployment Measuring Unemployment unemployment rate The ratio of the number of people unemployed to the total number of people in the labor force PART II Concepts and Problems in Macroeconomics. .. All of the above © 2012 Pearson Education, Inc Publishing as Prentice Hall 13 of 42 Unemployment Components of the Unemployment Rate Discouraged-Worker Effects PART II Concepts and Problems in Macroeconomics. .. looking, thus dropping out of the ranks of the unemployed and the labor force © 2012 Pearson Education, Inc Publishing as Prentice Hall 14 of 42 PART II Concepts and Problems in Macroeconomics When