ECO100Y1 Lecture Notes - Opportunity Cost, Business Cycle, Aggregate Demand

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March 16th: labour force activity, types of unemployment, the natural rate of unemployment (nairu) Labor force = # of people employed + # of people unemployed but seeking employment. Unemployment rate = # of people unemployed/labor force; Structural: mismatch in skill level, occupation, or region. Cyclical: unemployment related to business cycle; macroeconomic in origin. - cyclical unemployment is zero unemployment is only frictional or structural. - when economy is at the natural rate of unemployment (nairu): Monetary policy: bank of canada controls money supply/interest rate to influence aggregate demand; Fiscal policy: government uses expenditures/taxes to influence aggregate demand; e. g. march 2009 deep recession. U. s. 0. 5% (almost no potential for further stimulus to a. d. from interest rate cuts); Result: u. s. and canada adopt expansionary fiscal policy. - transfer payments to households (unemployment insurance, social assistance, public pensions, etc. ) Revenues outlays = 0 balanced budget. Revenues outlays > 0 budget surplus. Revenues outlays < 0 budget deficit.

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