ECN 204 Lecture Notes - Lecture 11: Unemployment, Full Employment, Real Wages

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Aggregate hours: total number of hours worked. Those who have been unemployed for 27 weeks or more. Is the highest reasonable expectation of employment for the economy as a whole. Occurs when there is no cyclical unemployment. Is defined in terms of the natural unemployment rate, which includes frictional and at least some structural. The rate that is consistent with full emplpiyment (the economy is producing its potential gdp) Existence of frictional (fu) and structural unemployment (su) Positive output gap: cannot be sustained indefinitely because it will cause inflation. Unemployment imposes costs in a nation: economic: Loss of self-esteem, depression: social: unemployment= stress. Increase in crime, divorce, domestic violence, alcoholism, drug abuse, etc. Immigration policy: quota for immigrants, relaxation of restrictions on professionals: minimum wage. A rise in the general level of prices. In most situations, not all prices are rising different products /services have different rates of price change. Measurement of inflation: consumer price index (cpi)

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