Economics cp chapter 13 power point

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Economics cp chapter 13 power point

  1. 1. Economics CP Chapter 13 Economic Challenges
  2. 2. Types of Unemployment <ul><li>Frictional Unemployment – people unemployed & looking for a job that better suits them </li></ul><ul><li>Seasonal Unemployment – unemployment as a result of seasonal schedules, vacation, or when industry slows or shuts down for season </li></ul>
  3. 3. Types of Unemployment <ul><li>Cyclical Unemployment – increases when economy contracts; decreases when economy expands </li></ul><ul><li>Structural Unemployment – unemployment because worker’s skills do not match available jobs; occurs b/c economy changes </li></ul><ul><li>5 causes: </li></ul><ul><ul><li>New technology </li></ul></ul><ul><ul><li>New resources </li></ul></ul><ul><ul><li>Changes in consumer demand </li></ul></ul><ul><ul><li>Globalization </li></ul></ul><ul><ul><li>Lack of education </li></ul></ul>
  4. 5. Measuring Unemployment <ul><li>Department of Labor, Bureau of Labor Statistics </li></ul><ul><li>Determine unemployment rate – national, state, county level </li></ul><ul><ul><li>Latest Unemployment Data </li></ul></ul><ul><li>Seasonally adjusted </li></ul>
  5. 6. Full Employment <ul><li>Do not want 0% unemployment – no room for expansion in economy </li></ul><ul><li>4-6% is ideal – currently 9% </li></ul>
  6. 7. Other employment terminology <ul><li>Underemployed – working at a job for which they are overqualified or working part-time & want full-time work </li></ul><ul><li>Discouraged worker – gave up looking for a job; not considered in unemployment % </li></ul>
  7. 9. Chapter 13 Section 2 Inflation
  8. 10. Inflation <ul><li>(don’t write) Fact: Prices have a tendency to increase over time </li></ul><ul><li>Inflation: general increase in prices </li></ul><ul><li>Purchasing Power: ability to purchase goods & services </li></ul><ul><li>When an increase in inflation causes a decrease in purchasing power , it is problematic! </li></ul>
  9. 11. Determining Inflation <ul><li>Need a price index – measurement of how the average price of a group of goods changed over time </li></ul><ul><li>Indices used for </li></ul><ul><ul><li>consumers to change spending habits </li></ul></ul><ul><ul><li>gov’t to adjust payments </li></ul></ul><ul><ul><li>unions to demand wages </li></ul></ul>
  10. 12. Major Price Indices (3 of ‘em) <ul><li>1. CPI – Consumer Price Index </li></ul><ul><ul><li>200 items in market basket (collection of goods/ services) </li></ul></ul><ul><ul><li>measured monthly </li></ul></ul><ul><ul><li>“urban goods” </li></ul></ul><ul><ul><li>base year (1982-1984) assigned 100 </li></ul></ul>
  11. 15. Major Price Indices <ul><li>2. PCE – Personal Consumption Expenditure </li></ul><ul><ul><li>Asks individuals how much spent in month </li></ul></ul><ul><ul><li>Eliminates problem of substitutes </li></ul></ul>
  12. 16. Major Price Indices <ul><li>3. PPI – Producer Price Index </li></ul><ul><ul><li>Cost of goods at intermediate states of production </li></ul></ul><ul><ul><li>Precursor to increase of CPI or PCE </li></ul></ul>
  13. 17. Inflation rate <ul><li>Def: % rate of change in price level over time </li></ul><ul><li>Ideally: 1-3%; 5% = instability </li></ul><ul><li>Often food & energy prices increase inflation; core inflation rate = inflation rate calculated w/o food & energy </li></ul><ul><li>Hyperinflation = inflation out of control; 100% to 500% per year; economic collapse </li></ul>
  14. 18. It’s time for a simulation … also known as … Why can’t the government just print as much money as possible?
  15. 19. Causes of Inflation <ul><li>quantity theory : too much $$$ in the economy; eliminate this by increasing the money supply at the same rate in which the economy is growing </li></ul>
  16. 20. Causes of Inflation <ul><li>demand-pull theory : “too many dollars chase too few goods” </li></ul><ul><ul><li>demand for goods & services exceed increasing supplies </li></ul></ul>
  17. 21. Causes of Inflation <ul><li>cost-push theory : inflation occurs when producers increase prices to meet increased costs </li></ul><ul><ul><li>led by wage increase b/c low unemployment cause companies to compete for workers </li></ul></ul><ul><ul><li>wage price spiral : rising wages cause higher prices; higher prices cause higher wages(p. 342) </li></ul></ul>
  18. 22. Effects of Inflation <ul><li>weakens purchasing power </li></ul><ul><li>income: must “keep up” with inflation; people on fixed income especially impacted </li></ul><ul><li>Interest rate: amount truly gained on savings may depend on rates </li></ul>
  19. 23. Inflation in History <ul><li>Inflation has been low since the 1970s oil embargo </li></ul><ul><li>Because of high unemployment right now, little chance of inflation except in energy costs </li></ul>
  20. 25. Chapter 13 Section 3 Poverty
  21. 26. Defining Poverty <ul><li>Poverty threshold – income level below which income is insufficient to support a family/ household </li></ul>37,010 8 33,270 7 29,530 6 25,790 5 22,050 4 18,310 3 14,570 2 $10,830 1 Poverty guideline Persons in family
  22. 27. Defining Poverty <ul><li>Poverty rate: % of people who live in households with income below poverty threshold </li></ul><ul><li>Children are highest age group in poverty </li></ul>
  23. 28. Causes of Poverty <ul><li>Not lack of work: </li></ul><ul><ul><li>Head of Household makes $8.00/ hour and works 40 hours/ week </li></ul></ul><ul><ul><li>Weekly income: $320; 52 weeks/ year: $16,640/ week </li></ul></ul><ul><ul><li>Check out the poverty guidelines; At what sized household will he/ she be in poverty? </li></ul></ul>
  24. 29. Causes of Poverty <ul><li>LACK OF EDUCATION!!! </li></ul><ul><ul><li>Median income of HS dropout: $18,344 </li></ul></ul><ul><ul><li>HS grad earns 1/3 more; $24,458 </li></ul></ul><ul><ul><li>College grad 3 times more: 55,032 </li></ul></ul>
  25. 30. Causes of Poverty <ul><li>2. Location </li></ul><ul><li>inner city v. suburbs v. rural </li></ul><ul><li>cost of living NOT considered </li></ul>
  26. 31. Causes of Poverty <ul><li>3. Racial/ gender discrimination </li></ul><ul><li>4. Economic shifts </li></ul><ul><li>5. Family structures </li></ul>

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