MacroeconomicsI_working_version (1)

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Labour Market, Unemployment 85 8.4.3.3. Cyclical Unemployment Cyclical unemployment is associated with cyclical fluctuations of the economy. It equals the difference between actual and natural rate of unemployment. Accordingly, this type of unemployment refers to output gap – the difference between potential and actual output. Cyclical unemployment occurs in situation where the business cycle is in recession. The main reason is a decline or deficiency of total spending. As the aggregate demand for goods and services declines, employment decreases and unemployment rises. Cyclical unemployment is, thus, sometimes called deficient demand unemployment. 8.4.4. Definition of “Full Employment” The explanation of full employment is not as easy as it could seem. One might think it means that everyone in the labour market is employed, and thus, that unemployment is zero. In real, there is a part of unemployment, which is considered normal, warranted or natural. Frictional and structural unemployment are considered as essentially unavoidable in a dynamically developing economy. Hence “full employment” is something less than 100 percent employment of the labour force. Specifically, the full-employment unemployment rate covers the total frictional and structural unemployment. In other words, the full employment unemployment rate occurs when cyclical unemployment is zero. The rate of unemployment relating to full employment corresponds to natural rate of unemployment. The aggregate output produced in the economy with the natural rate of unemployment is known as potential output. This level of output is produced with fully employed labour. 8.4.5. Costs of Unemployment Economic costs Unemployment above the natural rate implies large economic and social costs. The basic economic cost of unemployment is the lost output. Potential output is not reached in the economy, which is unable to create enough jobs for all who are willing and able to work. This loss in output is measured by output gap – the difference between the level of actual and potential output. Another cost of unemployment is that its cost is unequally distributed. This burden of unemployment is connected with the fact that the lost wage income is not reduced proportionally across the society.
86 Chapter 8 Noneconomic costs Long lasting severe involuntary unemployment implies idleness, which causes the loss of skills, loss of self-respect, family disintegration, moral decline, and social unrest. Deep unemployment means more than a pure economic problem – it brings society into misbalance.
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Mendel University for Agriculture a
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2 Chapter 1 To understand the funda
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4 Chapter 1 1.2. Macroeconomics vs.
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6 Chapter 1 Policy economics Theore
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8 Chapter 1 Figure 1.3 How models w
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10 Chapter 1
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12 Chapter 2 The mainstream economi
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14 Chapter 2 contributed to repeali
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16 Chapter 2 2.4. (Neo)conservative
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Page 21 and 22: 20 Chapter 3 In this chapter we int
Page 23 and 24: 22 Chapter 3 3.1.2. The Slope of AD
Page 25 and 26: 24 Chapter 3 Changes in Aggregate D
Page 27 and 28: 26 Chapter 3 Let’s assume, for no
Page 29 and 30: 28 Chapter 3 A rise in productivity
Page 31 and 32: 30 Chapter 3 P AD E AS 1. Equilibri
Page 33 and 34: 32 Chapter 4 The main aim of human
Page 35 and 36: 34 Chapter 4 4.2.1. Growth Accounti
Page 39 and 40: 38 Chapter 5 The business cycle cou
Page 41 and 42: 40 Chapter 5 5.3. Types of Business
Page 43 and 44: 42 Chapter 5 5.4.2. Supply Side Bus
Page 45 and 46: 44 Chapter 6 The goal of this chapt
Page 47 and 48: 46 Chapter 6 Final goods cover good
Page 49 and 50: 48 Chapter 6 The relationship descr
Page 51 and 52: 50 Chapter 6 Table 6.1 Accounting s
Page 53 and 54: 52 Chapter 6 “domestic”. GDP me
Page 55 and 56: 54 Chapter 6 6.3.2.2. Disposable In
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Page 61 and 62: 76 Chapter 8 S Real wage Labour Sup
Page 63 and 64: 78 Chapter 8 In the case that the M
Page 65 and 66: 80 Chapter 8 Supply Real wage w A D
Page 67 and 68: 82 Chapter 8 If the total labour fo
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Page 73 and 74: 88 Chapter 9 We speak about inflati
Page 75 and 76: 90 Chapter 9 9.2. Three Grades of I
Page 77 and 78: 92 Chapter 9 9.3.2. Cost-Push Infla
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Page 81 and 82: 96 Chapter 9 This relationship, kno
Page 83 and 84: 104 Chapter 10 Macroeconomic policy
Page 85 and 86: 106 Chapter 10 11.1.2. Monetary Pol
Page 89 and 90: 110 Chapter 12 The main tools of go
Page 91 and 92: 112 Chapter 12 P AD’ AD AS Q* Q F
Page 93 and 94: 114 Chapter 12 12.2. Non-Discretion
Page 95 and 96: 116 Chapter 12 12.4. Crowding-Out E
Page 97 and 98: 118 Chapter 13 Central banks have a
Page 99 and 100: 120 Chapter 13 We can summarise the
Page 101 and 102: 122 Chapter 13 (a) Monetary Tighten
Page 103 and 104: International Linkages 125 14. Inte
Page 105 and 106: International Linkages 127 A nation
Page 107 and 108: International Linkages 129 required
Page 109 and 110: International Linkages 131 foreign
Page 111 and 112: International Linkages 133 The dete
Page 113 and 114: Money Market, Money Supply, Money D
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Money Market, Money Supply, Money D
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The Phillips Curve 97 10. The Phill
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The Phillips Curve 99 ∆P/P ∆W/W
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The Phillips Curve 101 10.3. Moving
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