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Lecture 15

ECO105Y1 Lecture Notes - Lecture 15: Potential Output, Phillips Curve, Business Cycle


Department
Economics
Course Code
ECO105Y1
Professor
Avi Cohen
Lecture
15

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ECON 105
2015/2016
Lecture 13
25 January 2016
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2HEALTY & UNHEALTHY UNEMPLOYMENT
The unemployment rate measures the percentage of the labour force wh
o are out of work and actively searching for jobs, but misses involu
ntary part-time workers and discouraged workers.
There are four types of unemployment — frictional, structural, seas
onal, and cyclical — but only cyclical unemployment is both unhealt
hy and a problem.
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·Statistics Canada sorts working-age population
(age 15 and over) into three categories
·Employed
working full-time or part-time at paid job
·Unemployed
not doing paid work and actively searching for job; on temporary la
yoff; about to start new job
·Not in the labour force
not employed or unemployed
(full-time student, homemaker, retiree)
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4Labour Force Categories
for Working-Age Population (July 2014)
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·Labour Force = employed + unemployed
·Unemployment Rate
·Percentage of people in labour force who are unemployed
·Labour Force Participation Rate
·Percentage of working-age population in the labour force (employed o
r unemployed)
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6Unemployment Rates in Canada,
1926 - 2013
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ECON 105
2015/2016
Lecture 13
25 January 2016
2
8
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· Unemployment rate misses
·Involuntary part-time workers
employed part time, would rather have
full-time job, but can’t find one
·Discouraged workers
want to work but have given up actively
searching for jobs
·Labour Underutilization Rate
unemployment rate including unemployed, involuntary part-time worke
rs,
discouraged workers
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Unemployed Employed Labour Unemployment
Force Rate
20 80 100 20 %
10 80 90 11 %
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10 Unemployment and Underutilization of Labour,
July 2014
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11 Unemployment Rate and Labour Underutilization Rate (R8)
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·Healthy and unhealthy types of unemployment
·Frictional unemployment
due to normal labour turnover and job search; healthy part of a cha
nging economy;
not a problem
·Structural unemployment
due to technological change or international competition making wor
kers’ skills obsolete; mismatch between skills workers have and ski
lls new jobs require; healthy part of changing economy; problem requ
iring retraining
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·Seasonal unemployment
due to seasonal changes in weather;
healthy;
not a problem
·Cyclical unemployment
due to business cycle fluctuations in economic activity;
unhealthy part of changing economy; problem needs fixing
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