1. AP Economics Mr. Bernstein Module 12: The Meaning and Calculation of Unemployment February 6, 2015

2. AP Economics Mr. Bernstein The Meaning and Calculation of Unemployment Objectives - Understand each of the following: How unemployment is measured How the unemployment rate is calculated The significance of the unemployment rate for the economy The relationship between the unemployment rate and economic growth 2

3. AP Economics Mr. Bernstein 3

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5. Defining and Measuring Unemployment BLS produces statistics: http://www.bls.gov/bls/unemployment.htm The population is divided into three groups: Working at least one hour (Employed), not working but seeking work (Unemployed) and those “not in the labor force” Labor Force LF = Employed + Unemployed Labor Force Participation Rate LFPR = 100 * LF / (civilian population 16 or older) Unemployment Rate UR = 100 * # Unemployed / # Labor Force 5

6. AP Economics Mr. Bernstein Significance of the Unemployment Rate Indicator of the Ebb and Flow of the Macroeconomy (Circular Flow) Can understate true unemployment Reduced hours Underemployment Discouraged workers (not in labor force) Affects different groups disproportionally 6

7. AP Economics Mr. Bernstein Unemployment and Growth What is relationship between GDP and UR? Consider Recessions, Expansions GDP can be negative. How low can UR go? 7

8. AP Economics Mr. Bernstein Unemployment and Growth GDP rises when UR falls 8

9. AP Economics Mr. Bernstein Unemployment and Growth UR rises when GDP falls 9