1. Chapter 13: Economic Challenges
Unemployment, Inflation & Poverty

2. 92,584,000 Americans not in work force; Unemployment Rate at 5
92,584,000 Americans not in work force; Unemployment Rate at 5.9 percent on October 3, 2014
Current Unemployment Rate (April, 2019): %

4. Types of Unemployment Type Definition Frictional
People take time to find jobs, are laid off, need time to find a job after school, etc.
Seasonal
Industries slow or shut down for a season, or make seasonal shifts in production schedules.
Structural
A workers’ skills do not match available jobs
Cyclical
Unemployment that rises during economic downturns (recessions) and falls when the economy improves

5. Causes of Structural Unemployment
New technology
New resources
Changes in consumer demand
Globalization
Lack of education

6. Measuring the Unemployment Rate
Number of people unemployed divided by the number of people in the civilian labor force, times 100
Number of unemployed X
Number in labor force

7. Example
If the number of unemployed is 6.4 million and the number of people in the civilian workforce is million, what is the unemployment rate? X

8. “Normal” Unemployment
Is between 4-6%
Full employment exists when there is no cyclical unemployment
In a “fully employed” economy, there would still be frictional, seasonal & structural unemployment

9. People are considered to be underemployed if:
They work at a job for which they are over-qualified
They want full- time work but can only find part- time

10. Discouraged Workers Have stopped looking for employment
They are NOT counted in the unemployment rate because they are not actively looking for a job

11. Inflation

12. Inflation: a general increase in prices.
In the “good old days,” you could get a movie ticket for a quarter and an ice cream cone for a nickel
Prices have risen over the years, but so have wages

18. Calculating Inflation
Inflation rate: percentage rate of change in price level over a period of time
Uses a statistic called the Consumer Price Index or CPI
(CPI for Year A - CPI for Year B)
CPI for Year B X

19. What is the Consumer Price Index (CPI)?
Determined by measuring the price of a standard group of goods of a typical urban consumer
It shows average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The best-know is the CPI
Computed by the Bureau of Labor and Statistics (BLS)
The market basket changes about every 10 years

20. X 100 Determining the CPI Updated Cost Base Period Cost $330 $200
Example: Suppose the market basket cost $200 during the base period and costs $330 today.
$330
$200 X

22. Poverty
Section 3

23. Poverty Threshold
Income level below which income is insufficient to support a family our household
Currently $23,805 for a family of 4

25. Poverty Rate Percentage of people living below the poverty threshold
Currently around 15% in the U.S.

27. Causes of Poverty Lack of education Location
Racial/Gender Discrimination
Economic Shifts
Shifts in Family Structure

28. Lack of Education

29. Location

30. Discrimination

31. Economic Shifts

32. Shifts in Family Structures