6.Measuring Unemployment

The unemployment is the inability of willing workers to find gainful employment.

Part-time workers are counted as «employed».

Discouraged workers» who want job, but are not actively seeking one, are not counted as being in the labour force, so they are not part of unemployment statistic.

The unemployment rate is the number of people who are unemployed (actively seeking employment but unable to find work) expressed as a percentage of the total labor force («the economically active population»)

7. Types of unemployment:

Frictional unemployment:

• Consist of those searching for jobs or waiting to take jobs soon

• It is regarded as somewhat desirable because it indicates that there is mobility as people change or seek jobs(вскоре надеется найти работу)

Reasons:

- some workers will be voluntarily moving from one job to another

- reenmployment

- seasonality

- yaung workers will seek for their first job

Structural unemployment:

• Due to changes in the structure of demand for labour; when certain skills become obsolute or geographic distribution of jobs changes

Example: glases blowers were replaced by botle-making machines

Cyclical unemployment:

• Is coursed by the recession phase of the busines cycle, which is sometimes caled deficient demand unemployment

8. Levels of unemployment. «Full-employment».

Level (rate) of unemployment- is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.

«Full-employment».

• Doesn't mean zero unemployment,but is equal to the total of frictional and structural unemployment(сумма)

• When the economy is at full-employment the natural rate of unemployment or NRU prevails in the economy (естественный уровень безработицы)

• With some unemployment, the economy still has room to grow in the short-run,as there are some workers available for firms to hire if they wish to expand output

The NRU is archived when labour markets are in balance:

• the economy's potential output is being achived(макс.возмозжность при данном кол-ве ресурсов)

9. Economic costs of unemployment.

GDP gap is the difference between potential(max возможный) and actual GDP(реальный)

For every 1 percent of unemployment above the natural rate, a 2 percent GDP gap ocurs(Okun's Law) – сколько мы теряем от процента безработицы

10. Inflation: meaning and measurement. Rule of 70.

Inflation - Is defined as a persistent increase in the average price level in the economy, usualy measured trough the calculation of a consumer price index (CPI) – процесс обесценения ден. cредств, кот. может выражаться в повышении ур-ня цен)

«The Rule of 70»: 70 / inflation rate = years for the price level to double

11. Types of inflation

• Demand-pull inflation(спроса): an excess of total spending beyond the economy's capacity to produce. When resources are already fuly employed, firms can't respond to increase in demand.

• Cost-push or suply side inflation(предложения, издержек): prices rise because of rise in per-unit prodaction costs

12.Effects of inflation

.» wage-push(рост зароб.пл):can occur as result of union strength and supply shocks may ocur with unexpected increase in the price of raw materials(сырье)

» cost-push: experince has shown that rising prices and unemployment can exist together, it's called stagflation

»mild inflation(<3%) – it may be a healthy by product of a prosperous economy or it may have an undesirable impact on real income

»creeping inflation(ползучая)- turning into hyperinflation which can cause speculation reckless spending and more inflation

13. Phases of the business cycle

- Peak(бум) there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living.

- Recesion (рецессия) the economic activities slow down

- Trough (депрессия) there is a continuous decrease of output, income, employment, prices and profits, there is a fall in the standard of living

- Recovery (оживление) there are expansions and rise in economic activities

14. Reasons and results of business cycles

Reasons:

- Changes in interest rate affect consumer spending and economic growth. See: Interest rate cycle

- Changes in house prices. A rise in house prices creates a wealth effect and higher consumer spending. A fall in house prices causes lower consumer spending and bank losses. (house prices and consumer spending)

- Consumer and Business confidence. People are easily influenced by external events. If there is a succession of bad economic news, this tends to discourage people from spending and investing making a small downturn into a bigger recession. But, when the economy recovers this can cause a positive bandwagon effect.

Results: ?