Economics cp chapter 13 power point

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