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Chapter 28

Economics 10b Chapter Notes - Chapter 28: Market Power, Current Population Survey (Us)

Course Code
Economics 10b
Gregory Mankiw

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Chapter 28: Unemployment
-natural rate of unemployment: amount of unemployment that the economy
normally experiences
-cyclical unemployment: year-to-year fluctuations in unemployment around its
natural rate
Identifying Unemployment
- measured by the Bureau of Labor Statistics of the Department of Labor
- data comes from Current Population Survey
- puts adults into employed, unemployed or not in the labor force
-labor force: the total number of workers, including both the employed and the
-unemployment rate: the percentage of the labor force that is unemployed
-labor-force participation rate: the percentage of the adult population that is in
the labor force
-discouraged workers: individuals who would like to work but have given up
looking for a job (do not show up in unemployment statistics)
- most spells of unemployment are short and most unemployment observed at any
given time is long-term
-frictional unemployment: unemployment that results because it takes time for
workers to search for the jobs that best suit their tastes and skills
- inevitable because economy is always changing between different firms and
- sectoral shifts are the changes in composition of demand among industries or
-structural unemployment: number of jobs available in some labor markets is
insufficient to provide a job for everyone who wants one
-unemployment insurance: government program that partially protects workers
incomes when they become unemployed
- unintentionally increases frictional unemployment
- unemployment when wage is kept above equilibrium level
Unions and Collective Bargaining
-union: worker association that bargains with employers over wages, benefits, and
working conditions
-collective bargaining: process by which unions and firms agree on the terms of
-strike: organized withdrawal of labor from a firm by a union
- unions create two groups  insiders who benefit from high union wages and
outsiders who do not get union jobs
- disadvantages  unions allocate labor inefficiently and inequitably
- advantages  balances firm’s market power and responds to worker concerns
Theory of Efficiency Wages
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