What is the classical market's predictions on the unemployment rate?
The classical labor market is free to adjust according to the "forces of supply and demand" --- Therefore, there is no involuntary unemployment: everyone who wants a job, gets a job.
How do Output, Unemployment, and inflation behave on the course of a business cycle?
What is the Unemployment Rate? How is it Calculated?
The percentage of people in the labor force that don;t have jobs but are actively seeking work.
=[Unemployed/(Unemployed + Employed)]
What is the Labor Force? How is it calculated?
Consists of people who are employed and unemployed. (=employed + unemployed)
What is the classical market's approach to employment?
Presumes employment is determined by the supply and demand for workers
What would Keynes say happens when wages are reduced?
If we lower wages, we lower spending.
What is the business cycle?
Cycle that measures Output (GDP), the rate of unemployment, and the rate of inflation over a certain period of time.
What are the shortcomings of the Unemployment rate?
Underestimates the true rate by:
-Not counting discouraged workers
-Counting involuntarily part time employees
-Ignores labor underutilization (people with high qualifications take up low-skilled jobs due to lack of jobs)
What is Keynesian Unemployment? Why is there unemployment from the Keynesian viewpoint?
Keynesian unemployment is unemployment due to a lack of spending (a lack of aggregate demand).
What is the classical market's predictions on the unemployment rate?
The classical labor market is free to adjust according to the "forces of supply and demand" --- Therefore, there is no involuntary unemployment: everyone who wants a job, gets a job.
