About This Chapter
Unemployment Basics - Chapter Summary
Explore theories, definitions and calculations relating to unemployment with the overviews presented in these brief lessons. Find out about unemployment types, rates and costs as well as the impact of the efficiency wage theory on the labor market. After you complete your review of this chapter, you should be able to do the following:
- Understand the unemployment rate is measured and why it fluctuates
- Relate the three main types of unemployment
- Apply the formula to determine the natural rate of unemployment
- Explain the theory of rational expectations and how it can be applied to unemployment
- Describe how setting a minimum wage impacts unemployment
- Analyze the natural rate of unemployment
- Determine the costs of unemployment on businesses and the government
- Detail how the efficiency wage theory is used and how it affects the labor market
Lessons are presented by experienced economics instructors and are simple and engaging to ensure that the material is easily learned. Take self-assessment quizzes at the end of each lesson to determine how much you have retained and if there are topics you need to further review. Use your Dashboard to track your progress through this chapter.
1. Defining and Measuring the Unemployment Rate
You've probably heard about the unemployment rate, especially given how high it was in the 2008 recession. Find out how economists define unemployment, what the unemployment rate is, and how to calculate it in this lesson.
2. Why the Unemployment Rate Decreases and Increases
Policymakers, investors, and consumers watch the monthly unemployment rate with great interest. In this lesson, you'll learn what factors influence the unemployment rate and why the rate can change rapidly from month to month.
3. Three Types of Unemployment: Cyclical, Frictional & Structural
If you've ever lost your job after the holiday season, you've experienced at least one type of unemployment. In this lesson, explore the three types of unemployment including cyclical, frictional, and structural using real-world examples.
4. Natural Rate of Unemployment: Definition and Formula
Explore the natural level of employment through the eyes of the Classical School and Keynesian economics, including fiscal policies that may reduce it.
5. Rational Expectations in the Economy and Unemployment
This lesson provides an overview of the theory of rational expectations and then applies it to the labor market, fiscal policy and monetary policy. In the lesson, you'll learn more about expectations and outcomes in a world where people want to maximize profit.
6. Minimum Wage and its Effects on Employment
There are times when the labor market is perfectly balanced between what employers are willing to pay and what workers want in a job. In this lesson, find out what happens to the labor market when governments intervene, imposing a minimum wage.
7. Natural Rate of Unemployment: Graphs & Analysis
Many economists believe in a natural rate of unemployment. In this lesson, you'll learn about the natural rate of unemployment and how it affects business.
8. Measuring the Costs of Unemployment
Unemployment has serious effects on individuals, businesses, governments, and the economy in general. In this lesson, you'll learn how the costs of unemployment impose on each of these. We'll also take a look at Okun's law.
9. Efficiency Wage Theory & Impact on Labor Market
In this lesson, we'll discuss efficiency wage theory. We'll cover what it is, how it impacts the labor market, and why companies may turn to this type of practice.
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