Transcript Economics Ch. 13

Economics
Ch. 13
Economic Challenges
Ch. 13.1
Unemployment
Frictional Unemployment
 Occurs when people take time to find a job
 Between jobs
 After college
 Finding the right job
Seasonal Unemployment
Structural Unemployment
 Workers skills do not match the jobs available
 New Technology
 New Resources
 Changes in Consumer Demand
 Globalization
 Lack of Education
Cyclical Unemployment
 Unemployment that rises during economic downturns
 The Great Depression
 FDR – Social Security Act of 1935
 Seniors
 Payment to those laid off
Full Employment
 4 – 6 % is normal rate of unemployment
 Underemployment – taking jobs that you are overqualified
for
 Discouraged Workers—stopped looking for a job – Dec.
2011 – 315,000 became discouraged no longer a part of the
unemployment figures
13.2
Inflation
General increase in prices
Purchasing power declines
Types of Inflation
Quantity Theory
 Too much money in circulation causes inflation
 Key to stable prices—increase money supply at same rate as
economy is growing
Demand Pull Theory
 Inflation occurs when demand for goods exceeds existing
supply
 Wages also rise with the increase in demand for labor
Cost Push Theory
 Inflation occurs when producers raise prices to meet
increased costs
 Higher prices for raw material = increase cost
 Wage price spiral-rising wages = higher prices, higher prices
cause higher wages
Effects of Inflation
 Purchasing Power – dollar does not buy the same amount
that it once did
 Income – erodes income if wages do not increase with
inflation—cost of living increase. Fixed incomes do not
increase – pension plans
 Interest Rates –if they are below inflation then you lose
money
13.3 Poverty
Poverty Rate 2010
Poverty Rate
 The nation's poverty rate rose to 15.1% in 2010, its highest
level since 1993. In 2009, 14.3% of people in America were
living in poverty.
 About 46.2 million people are now considered in poverty,
2.6 million more than last year.
 The government defines the poverty line as income of
$22,314 a year for a family of four and $11,139 for an
individual.
Poverty in US
 http://money.cnn.com/news/economy/storysupplement/c
ensus_poverty_map/index.html?iid=EL
Indicators of Poverty
 Race – Af. Am. / Hispanics – more than twice the rate of
white americans
 Type of Family – Single mother = 6 times greater than 2
parent
 Age – Children significantly larger
 Residence – Inner city
Causes of Poverty
 Lack of Education
 Location
 Racial/Gender
Discrimination
 Economic Shifts—last
hired first fired
 Shifts in family structure
 Antipoverty Policies
 Enterprise zones –
companies locate free of
certain taxes
 Employment Assistance –
job training programs;
minimum wage since 1938
 Welfare Reform –Welfare
to workfare – attempt to
get people off of welfare