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ECON 1132 (72)
Chapter

CH 6 Notes

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Department
Economics
Course
ECON 1132
Professor
Richard Tresch
Semester
Spring

Description
CH 6 - The Rule of 72: How long it takes to double an investment o R = 72 / % at which the economy is growing - Small changes in the rate of long­run economic growth have an impact on a  nation’s standard of living over the long run that dwarfs any other factor affecting  the standard of living - Labor Force = employed + unemployed (those who are actively seeking  employment but are unable to find a job) - Underemployed: Workers who are counted as employed but who are working  below their full capacities (part time when they want full or at jobs below their  skill level) - Discouraged: People who have become so discouraged trying to find work that  they have dropped out of the labor force - Cyclical Unemployment:  o Only unemployment that is highly responsive to the performance of the  economy and therefore to fiscal and monetary policies o Usually arises when there are changes in supply and demand, wages are  sticky and take time to get back to equilibrium o Insider/outsider theory: a theory that older, more experienced workers  have the decision making power and use it to place all the risks of a  business downturn on the younger, less experienced employees o Efficiency wage: A wage that is higher than necessary to retain the  employees, but that firms are willing to pay to improve the morale of the  employees so that they will remain happy and productive and not shirk  their duties; the wage that maximizes the profits of the firm - Frictional Unemployment: Not voluntary, caused by the continuously shifting  employment opportunities from sector to secto
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