1. Unemployment & Inflation
2 Challenges for Government

2. Today’s Unemployment Rate
Labor Force: ,500,000
Unemployed Workers ,400,000
Unemployment Rate 5.0%
(7.4 / million) = 5.0% )

3. ‘

4. Unemployment By Education
Less Than High School: %
High School Graduate: %
Less Than a Bachelor’s %
College Graduate %

5. 4-Types of Unemployment
Structural
Skills do not match demand for labor
Cyclical
Too low a level of aggregate demand
Frictional
Temporarily between Jobs
Seasonal
Out of work based on time of year

6. Full Employment
Unemployment cannot fall below the “natural” or full employment level (in long run)
Approximately 4%
allows for frictional & seasonal

7. INFLATION Economic condition of average prices rising Jeans $20 1997
GDP goes up => output remains the SAME
Consumer Price Index (CPI) used to measure inflation

9. Historical Inflation Germany: “hyperinflation” after World War I
Currency became worthless
USA: Late 1970s—Oil Crisis-- 13%
USA: low inflation since [ %]

12. 2-Types of Inflation Demand-Pull Inflation: Cost-Push Inflation
Too many dollars chasing too few goods
Demand Side Inflation
Cost-Push Inflation
Increase in cost of factors of production
Supply Side Inflation

13. Who is Helped by inflation?
People in Debt
Large Mortgages, Car Loans, Student Loans

14. Who is Hurt by Inflation?
People on a fixed income

15. Why is inflation Bad?
Difficult for Business to plan & price goods and services
Lowers the value of our currency
Lowers your purchasing power