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Lecture

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School
Department
Economics
Course
ECON 305
Professor
Dr.Neri
Semester
Spring

Description
2-25 econ Hyperinflation pi> 50% per month Money ceases to function as a store of value, and may not serve its other functions (medium of exchange, unit of account). Barter or foreign currency may be used. Causes are excessive money supply growth When Gov’t cant raise taxes or sell bonds it must finance spending increased by printing money. Therefore the solution is to stop printing money, but that is tough in the real world. CHAPTER 6 (maybe 5 in my book) The natural rate of unemployment is the avg rate of unemployment around which the economy fluctuates, in a recession, actual rises above natural rate, in a boom actual falls below the natural rate  The natural rate of unemployment is the “normal” unemployment rate the economy experiences when it is neither in a recession nor a boom. Notation: L = No. of workers in labor force E = No. of employed workers U = No. of unemployed U/L = unemployment rate Assumptions, L is exogenously fixed, and during any given month s = rate of job separations, the fraction of employed workers that become separated from their jobs f = rate of job finding, fraction of unemployed workers that find jobs s and f are exogenous the labor market is in steady state (long-run eq) if the unemployment rate is constant. The steady state condition is: sE=fU (# of employed people who lose or leave their jobs)=(#of unemployed people who find jobs) Apolicy will reduce the natural rate of unemployment only if it lowers s or increases f If job finding were instantaneous (f = 1), then all spells of unemployment would be brief, and the natural rate would be near zero. There are two reasons why f < 1: 1. job search 2. wage rigidity Frictional unemployment: caused by the time it takes workers to search for a job  occurs even when wages are flexible and there are enough jobs to go around  occurs because  workers have different abilities, preferences  jobs have different skill requirements  geographic mobility of
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