UNIT #6: MACROECONOMICS Mr. Lindquist – Economics STUDENTS CAN: Identify the stages of the Business Cycle Explain the 3 Macroeconomic Problems Identify the FOUR Types of Unemployment Apply knowledge of unemployment to explain different types in various real-life scenarios

MACRO vs MICRO Microeconomics: Macroeconomics: deals with behaviors and decision making by small units of the economy: individuals and firms Small Parts of the economy Macroeconomics: part of economics that deals with the economy as a whole and uses aggregate (total) measures of output, income, prices, and employment. BIG PICTURE of the Economy

Macroeconomics How does this affect you???? READING THE ECONOMY! Predicting Recessions and Expansions Timing Loans Timing Investments Examining Economic Indicators GDP, Unemployment, Inflation, Consumer Confidence, Business Cycles, Durable Goods, etc.

3 Macroeconomic Goals To create stable, economic growth. (GDP) 2. To have full employment and low unemployment. (Unemployment/mobilizing resources) 3. To have stable prices. (inflation/deflation)

ESSENTIAL QUESTION What can a nation’s GDP, unemployment, and inflation-rate tell us about the composition of its economy and the health of its economy? PRACTICAL QUESTION: Will you be able to read the economy to make educated decisions that will save you thousands of dollars???

Business Cycle

Mr. Lindquist Economics Unemployment Mr. Lindquist Economics

Unemployment Definition Unemployment includes people who are actively looking for work. MUST BE WILLING & ABLE TO WORK! People who have stopped looking are not counted as unemployed. LABOR FORCE: People looking for work over the age of 16yrs old. ISSUES WITH UNEMPLOYMENT MEASUREMENTS Measured by the number of people who file for unemployment. It can be misleading!!!

Measurements do not include: 1. Discouraged Workers: people who were looking for work but gave up because they didn’t succeed in finding a job. The unemployment rate underestimates, by the number of discouraged workers, the number of people who would like to work

Measurements do not include: 2. Underemployed Workers people who are working part time but would like to work full time, or who hold a job that requires a lower skill level than they possess. These people are considered employed, but they could be more productive in a different job.

Measurements do not include: 3. Distribution of Unemployment different groups within the economy experience vastly different rates of unemployment. The groups may be age cohorts, or race or ethnic categories. Knowing the distribution of unemployment by a particular characteristic is important in constructing policies to help the unemployed

Types of Unemployment Cyclical: people who are not working because firms do not need their labor due to a lack of demand or a downturn in the business cycle. Contraction/trough in the Business Cycle Sometimes called “RECESSIONAL UNEMPLOYMENT” For example, if people are not buying many goods and services, workers are laid off.

Types of Unemployment 2. Structural: mismatches between job seekers and job openings. 75% of people in Michigan have NO Bachelors degree Available jobs in Michigan, but require the right education. INCREASE HUMAN CAPITAL!!!! For example: unemployed people who lack skills or do not have sufficient education are structurally unemployed.

Types of Unemployment: 3. Frictional: They may have quit one job to find another, or they could be trying to find the best opportunity after graduating from high school or college. VOLUNTARY CHANGE IN CAREER

How can we fix it? Which of these do you think the government can influence? (Star the two the gov’t can affect) What are some ways in which the government could help to decrease these types of unemployment?

Unemployment Happens Full Employment: Natural Rate of Unemployment: happens with the economy is at the natural rate of unemployment. Usually about 4% Unemployment rate (now about 6%) Natural Rate of Unemployment: level of unemployment when there is no cyclical unemployment (can still have the next 2 types of unemployment)

WHAT TYPE OF UNEMPLOYMENT ARE EACH OF THE FOLLOWING FACING: Rob, a journalist, leaves his job in New Your to look for a new job in San Francisco. Frictional Frank, a factory worker get’s laid off and replaced by new technology. The Factory posts a new position as mechanical technician but Frank lacks these skills. Structural Sarah was hired at JC Penney’s in late November, but lost her job in January. Seasonal Lisa lost her job at GM because during the recession their products were not selling. Cyclical