Key Terms
Employed
Currently working for pay.
Unemployed
Out of work, currently available to work, AND actively looked for work in the previous four weeks. All three conditions
Out of the labor force
Not working AND not looking for work. Includes retirees, students, stay-at-home parents, and discouraged workers.
Labor force
Employed + unemployed. Does NOT include people out of the labor force.
Discouraged workers
Stopped looking for work because they can't find suitable positions. They are NOT counted as unemployed; they fall into
Underemployed
Working a job below their skill level. They ARE counted as employed, not unemployed.
Job Losers
Temporary | 8.5% New Entrants | 10.8% Job Leavers | 8.1%
Definition
The unemployment rate that exists in a growing, healthy economy; the rate that would exist absent a boom or a recession.
Estimated contribution to the unemployment rate
1-2 percentage points.
Formula
GDP Deflator = Nominal GDP / Real GDP Rearranged: Real GDP = Nominal GDP / GDP Deflator
Inflation
A sustained, generalized increase in the prices of goods and services in an economy.
Low
Below 2-3%; barely noticeable; may provide some economic benefit.
Moderate
10-20%; people change behavior because of it (U.S. in 1970s).
High
Significant economic problems. Hyperinflation: extreme; hundreds or thousands of percent per year.
Price level
The average level of prices across the economy.