1. Module The Meaning and Calculation of Unemployment KRUGMAN'S MACROECONOMICS for AP* 13 Margaret Ray and David Anderson

2. What you will learn in this Module : The three different types of unemployment and their causes The factors that determine the natural rate of unemployment

3. Job Creation and Job Destruction Many jobs can be destroyed in a month Structural changes in the economy

4. Frictional Unemployment Job Search Frictional Unemployment (Due to time workers spend in a job search.)(Ex. A college student graduates but doesn’t start a job for a month.) Duration periods of low unemployment periods of high unemployment

5. Structural Unemployment Persistent Surplus Structural Unemployment (ex. Outsourcing of U.S. Jobs) Minimum Wages Labor Unions Efficiency Wages Side Effects of Public Policy When there are more people seeking jobs in a labor market than there are jobs available at the current wage rate.

6. Structural Unemployment

7. The Natural Rate of Unemployment Natural Rate of Unemployment Natural unemployment = Frictional unemployment + Structural unemployment Cyclical Unemployment (resulting from changes in the business cycle) (ex. Construction workers losing their jobs in 2009) Actual unemployment = Natural unemployment + Cyclical unemployment

8. Changes in the Natural Rate of Unemployment Natural rate of unemployment changes Changes in Labor Force Characteristics Changes in Labor Market Institutions Changes in Government Policies

9. Figure 13.1 Distribution of the Unemployed by Duration of Unemployment, 2000 and 2010 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

10. Figure 13.2 The Effect of a Minimum Wage on the Labor Market Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

11. Figure 13.3 The Changing Makeup of the U.S. Labor Force, 1948–2009 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers