Economics Ch. 13 Economic Challenges

Ch. 13.1 Unemployment

Frictional Unemployment Occurs when people take time to find a job Between jobs After college Finding the right job

Seasonal Unemployment

Structural Unemployment Workers skills do not match the jobs available New Technology New Resources Changes in Consumer Demand Globalization Lack of Education

Cyclical Unemployment Unemployment that rises during economic downturns The Great Depression FDR – Social Security Act of 1935 Seniors Payment to those laid off

Full Employment 4 – 6 % is normal rate of unemployment Underemployment – taking jobs that you are overqualified for Discouraged Workers—stopped looking for a job – Dec. 2011 – 315,000 became discouraged no longer a part of the unemployment figures

13.2 Inflation General increase in prices Purchasing power declines

Types of Inflation

Quantity Theory Too much money in circulation causes inflation Key to stable prices—increase money supply at same rate as economy is growing

Demand Pull Theory Inflation occurs when demand for goods exceeds existing supply Wages also rise with the increase in demand for labor

Cost Push Theory Inflation occurs when producers raise prices to meet increased costs Higher prices for raw material = increase cost Wage price spiral-rising wages = higher prices, higher prices cause higher wages

Effects of Inflation Purchasing Power – dollar does not buy the same amount that it once did Income – erodes income if wages do not increase with inflation—cost of living increase. Fixed incomes do not increase – pension plans Interest Rates –if they are below inflation then you lose money

13.3 Poverty

Poverty Rate 2010

Poverty Rate The nation's poverty rate rose to 15.1% in 2010, its highest level since 1993. In 2009, 14.3% of people in America were living in poverty. About 46.2 million people are now considered in poverty, 2.6 million more than last year. The government defines the poverty line as income of $22,314 a year for a family of four and $11,139 for an individual.

Poverty in US http://money.cnn.com/news/economy/storysupplement/c ensus_poverty_map/index.html?iid=EL

Indicators of Poverty Race – Af. Am. / Hispanics – more than twice the rate of white americans Type of Family – Single mother = 6 times greater than 2 parent Age – Children significantly larger Residence – Inner city

Causes of Poverty Lack of Education Location Racial/Gender Discrimination Economic Shifts—last hired first fired Shifts in family structure Antipoverty Policies Enterprise zones – companies locate free of certain taxes Employment Assistance – job training programs; minimum wage since 1938 Welfare Reform – Welfare to workfare – attempt to get people off of welfare