Transcript Chapter 11 - Barren County Schools

ECONOMIC CHALLENGES
CHAPTER 11
UNEMPLOYMENT

The most closely watched and highly
publicized labor force statistic is the
unemployment rate, or the percentage of
people in the labor force who are
unemployed.

Some unemployment is unavoidable and a
natural part of a healthy economy –
economists consider an unemployment rate
of about 5% to represent full employment.
4 TYPES OF
UNEMPLOYMENT
1.
Frictional unemployment – when workers
are moving from one job to another – ex:
Heather leaves her job as a receptionist to
find a job as a data processor – during her
search, she is considered frictionally
unemployed.
2.
Structural unemployment – occurs as a
result of changes in technology or in the
way the economy is structured – Ex; less
demand for TV repair specialist because
of better technology.
3.
Seasonal unemployment – occurs from
season to season as a result of holidays,
the school year, harvest schedules, etc. –
Ex: spring, summer, and fall are busy
seasons for farm workers – however, they
may lose their job during the winter
months.
4.
Cyclical unemployment – results from
recessions and economic down turns –
harms the economy more than any other
type of unemployment – Ex: when sales
decline, producers tend to reduce
production and lay off workers.
INFLATION

An increase in the average price level of all
products in an economy is called inflation –
occurs when the quantity demanded is more
than the quantity supplied, consumers must
compete for limited products and prices go
up.
DEFLATION

The opposite of inflation is deflation, which
is a decrease in the average price level of all
products in an economy – occurs when the
quantity supplied is more than the quantity
demanded.

Economists classify inflation into 2 general
categories based on cause:
1. DEMAND - PULL
INFLATION

Occurs when prices are pulled up by high
demand – Ex: during the 1996 holiday
season, enormous demand for the Tickle Me
Elmo doll caused widespread shortages
which increased the market price for that
good.
2. COST- PUSH INFLATION

Occurs when prices are pushed up by high
production cost – Ex: a car could be bought
in the 1920’s for as little as $250, however,
new technology has increased production
cost and led to a higher price for cars.
POVERTY and INCOME
DISTRIBUTION

Another way to examine the economic wellbeing of a nation is to measure the number
of people who are living in poverty – Ex: in
2006, 12.3% were living in poverty in the
U.S.

According to the Census Bureau, individuals,
families, or other households are living in poverty
if their total incomes fall below designated income
levels – the poverty threshold, or poverty level, is
the lowest income that a family or household of a
certain size needs to maintain a basic standard of
living – Ex: 1n 2008 the poverty threshold for a
family of 4 was $21,200 .

The poverty rate is the percentage of
individuals or families in the total
population that are living in poverty.