Macroeconomics

• unemployment describes someone who is willing and able to work, and is actively searching for a job, but is unable to find one
• unemployment occurs when workers who want to find jobs cant
• high rates of unemployment signal economic distress
• low rates of unemployment may show an overloaded economy
• unemployment data is collected by government agencies
• many governments offer benefit payments to unemployed if they meet a criteria
• claimant count (JSA) refers to the number of people claiming unemployment benefits
• advantages of the claimant count:

  • easy to obtain
  • no cost
  • updated monthly
• disadvantages of claimant count:

  • government manipulation
  • people that don’t claim aren’t included
• labour force survey (LFS) refers to the population who are willing and able to work and available to work. not everyone on LFS claims benefits
• advantages of labour force survey:

  • more accurate
  • can be internationally compared
• disadvantages of labour force survey:

  • less up to dare
  • expensive to collect
  • unrepresentative of sample
• strengths of employment data:

  • new figures every month
  • large sample size
  • local and regional
  • low level of welfare benefit fraud
• problems with unemployment data:

  • hidden employment
  • sample errors are investable
  • high levels of underemployment
  • high rate of labour migration
• underemployment is where people are looking for a different job or want to work more hours in their current job
• seasonal unemployment is where regular seasonal changes in employment effect labour demand
• structural unemployment occurs from a mismatch of skills and job opportunities from the economy structure changing
• frictional unemployment is transitional unemployment due to people moving between jobs
• cyclical unemployment is caused by a fall in AD
• occupational immobility occurs where there is a change in the methods of production
• geographical immobility is where it is difficult for the unemployed to relocate
• cyclical employment is involuntary
• cyclical unemployment - AD shifts left
• Inflation is the rate at which the prices for goods and services increase
• Deflation is a sustained decrease in the general price level of goods and services
• disinflation is when the rate of inflation decreases overtime, meaning prices slowly rise
• demand pull inflation occurs when the aggregate demand in an economy grows faster than the aggregate supply
• cost push inflation occurs when the cost of production increases causing businesses to raise prices to maintain profit margins
• demand pull inflation is illustrated by a rightward shift in AD
• consumers have greater purchasing power than goods available in demand pull inflation
• cost push inflation is illustrated by a leftward shift in SRAS, leading to higher prices and lower output
• when prices rise faster than income, the value of savings diminish
• consumers may delay purchases if they anticpiate future price increases
• higher wages may lead to a decline in unemployment in the short term
• as inflation continues businesses may lay off workers in the long term
• if wages dont keep up with inflation, purchasing power and the standard of living falls
• a little inflation encourages consumers to buy products sooner making it easier for firms to control wages. this boosts economic growth
• Monetary policy to tackle inflation: central banks lowering base rate to increase prices
• contractionary fiscal policy to tackle inflation: aim to reduce aggregate demand by increasing income tax to decrease consumption
• reducing government spending on programs can directly decrease AD