Ch16 Powerpoint info

1. 1. What is the measure of joblessness in the United States economy?
Unemployment rate
Definition of unemployed: people available for work who made a specific
effort to find a job during the past month
Things to consider about the unemployment rate:
Does not account for ‘dropouts’, which are people who have become frustrated or discouraged with
searching for a job and have stopped looking for work
A person is considered employed even if they were paid for only one hour of work

2. 2. What are the five types of unemployment?
https://www.youtube.com/watch?v=ZckAN1KYB5I
a. Frictional unemployment – workers who are between jobs
b. Structural unemployment – economic changes make certain workers unnecessary
c. Cyclical unemployment – related to the swings of the business cycle
d. Seasonal unemployment – related to changes in weather, economic demands, etc.
e. Technological unemployment – when low-skilled workers are replaced by machines
5. What causes technological unemployment?
Automation: production with mechanical or other processes that reduces the needs for workers
6. What level of unemployment do most economists consider to be full employment?
Below 5% unemployment

3. 1. What is inflation?
A rise in the general price level
2. What are three degrees of inflation, from least to most severe?
a. Creeping inflation: 1-3% per year
b. Galloping inflation: 100-300% per year
Can happen in developing countries, e.g., Latin American
countries
c. Hyperinflation: 500%+ per year

4. 3. What are five explanations for the cause of inflation?
a. Demand-Pull Theory – When demand from all sectors of the
economy for goods and services is higher than what the economy can
produce
b. Government Deficit – deficit – government spending in excess of taxes and other
revenues – increase of prices is due to government overspending
c. Cost-Push – When labor groups increase the wages of employees via negotiation,
price of manufacturing increases, which causes higher prices
d. Wage-Push Spiral – If employers are required to raise wages, they may try to recover
increased costs by increasing prices, endless cycle
e. Excessive Monetary Growth – When money supply grows faster than GDP, more
money is spent on goods, which triggers a demand-pull effect that increases prices

5. 4. What are four ways that inflation destabilizes the economy?
a. Dollar buys less – especially impacts the
purchasing power for people on fixed incomes
(elderly, etc.)
b. Spending habits change – prices increase to a point where
consumers buy other goods -> that company produces less ->
unemployment for those employees
c. Speculation increases – buying diamonds, art, or other
exotic items as investments – removes money from the
economy which could lead to structural unemployment
d. Distribution of income is altered: debtors benefit over
creditors (inflation vs. interest rate)

6. 5. Why is inflation especially hard on those people with fixed incomes?
Inflation reduces the purchasing power of the dollar, which means
the purchasing power of the fixed income will decrease.

7. 1. What is the purpose of the Lorenz curve?
The Lorenz curve shows how the actual distribution of income
varies from an equal distribution of income

8. What are five reasons that income is not distributed equally in the United
States?
a. Education – More education generally means better paying jobs, not
accessible or equal for everyone
b. Wealth distribution – 75% of wealth owned by the top 10% wealthiest people
c. Discrimination – drives women and minorities into oversupplied and lesser-paid
labor markets
d. Ability – unique natural talents that allow some people more success than
others (e.g., sociable, aggressiveness, tenacity, persuasive speaker, cutthroat,
etc.)
e. Monopoly Power – when certain groups hold almost complete control over
specific job types (e.g., American Medical Association and limiting medical
school students)

9. Note: Below contains additional info that is on the test. You should write this
info at the bottom of your Section 3 page or any other place. Honestly it does
not matter as long as you remember these two terms.
Blue-collar worker – factory or industry worker, more generally, a working
class person who performs manual labor
White-collar worker - a person who performs professional, managerial, or
administrative work. For example, office worker, doctor, teacher

10. 3. What is the poverty threshold?
The annual dollar benchmark used to determine whether a family is in poverty
or not