Unemployment Rate: Standard 4% to 5%
Formula: number of unemployed
number of employed + number of unemployed
Types of Unemployment
Frictional Unemployment: Temporarily unemployed or between jobs
Structural Unemployment: Workers do not have transferable skills and their jobs will never come back
Seasonal Unemployment: Unemployed due to time of year and nature of job
Cyclical Unemployment: Unemployment from Economic downturn. As demand for goods and services fall, demand for labor fall.
Okun's Law
For every 1% that actual unemployment rate exceeds the natural rate of unemployment, a GDP gap of about 2% occurs
Labor Force
1. Above 16 years of age
2. Able and willing to work
Not in Labor Force
1. Military
2. People in jail/ prison
3. People in mental institution
4. Retired
5. Under 16 / students
6. Homemakers
7. People not looking for a job
Rule of 70
Used to determine how many years it takes for a value to double given a particular annual growth rate
ex: If you put $20,000 in the bank and it earns a yearly interest rate of 7% then how many years will it take for income to double.
answer : Take 70 and divide it by interest rate
70/7 = 10 years.
Used to determine how many years it takes for a value to double given a particular annual growth rate
ex: If you put $20,000 in the bank and it earns a yearly interest rate of 7% then how many years will it take for income to double.
answer : Take 70 and divide it by interest rate
70/7 = 10 years.
Including an example to help demonstrate the Rule of 70 was a great help to understand how to do the formula correctly. The video explaining Okun's Law was little bit more in depth than what we have learned in class, so it was a tad confusing, but it had a lot of useful information which was interesting to hear.
ReplyDeleteHey for the unemployment formula don't forget to multiply by 100 at the end. Also can you clarify on how to calculate Okun's law, I am still confused on that topic.
ReplyDelete