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15 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Frictional Unemployment
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Short term nature due to changes in RELATIVE COMPETITIVE STRENGTH of firms and churning labour force
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Short...
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Structural Unemployment
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Due to changes in PATTERN OF DEMAND and STATE OF TECHNOLOGY
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Due to...
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Voluntary Unemployment
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Due to poor INCENTIVES to work
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Poor...
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Unemployment that is voluntary
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Choosing to engage in full time JOB SEARCH in hope of finding a better job than they've been offered so far
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Choosing to...
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Causes of Involuntary Employment
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Distortions in Labour Market - Minimum wage prevents wages dropping to equilibrium that'd prevail in free market setting
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Labour market distortion...
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Natural Rate of Unemployment
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Reflects pace of structural change, tax and welfare system and other social institutions that affect efficiency with which labour market works
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Mainstream Approach to Reduce Unemployment
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Reform labour market
Cut unemployment benefits Privatise public housing Change structure of taxation - no income tax, goods/services instead Cheaper childcare Work on supply side of economy |
6 points
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Disadvantages to Inflation
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Erodes real wages and rate of interest
Changes distribution of wealth - favours debtors Entrepreneurs find it harder to work out which markets to enter/exit cos prices don't adjust simultaneously Speculative behaviour instead of genuine enterprise Increased transaction costs - more frequent price changes Some markets may cease to function - value over money |
6 points
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Mainstream economists see price and output in terms of...
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... the interaction of supply and demand
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S&D
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Aggregate Supply Curve slopes upwards since, to produce more output, firms need to:
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Pay existing workers overtime rates
Hire more workers Make use of less productive workers and older vintages of machinery |
3 points
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Heterodox View of Supply and Demand Functions
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Aggregate demand not prone to major fluctuations - income earning capacity is long term
Lower the price level, higher the value of human capital and higher purchasing power of money balances that people are holding |
Aggregate demand not prone...
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Inflation Points
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Increase in money supply leading to increase demand
Temporary reduction in unemployment below normal Increase demand for labour, workers interpret higher real wages Employers expand output because they put prices up faster than they have to put wages up to attract more workers Real wages, fallen not risen More aggressive with wage demands and thorough job searches Level of employment goes back to normal |
6 points
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Increasing the Money Supply
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Holds unemployment below normal
Even faster price rises leads to accelerating rate of inflation ultimately collapse of confidence in currency |
4 points
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To prevent irresponsible monetary expansion
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Avoid public sector deficits (borrow from central banks)
Separate central bank from government influence - make it responsible for keeping low range inflation |
2 points
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To lower supply side costs and increase output per head
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Deregulate markets - more competition
Privatise nationalised industries Cut costs of public services by outsourcing to private ones Reduce costs of remaining public sectors by introducing user charges Use savings to reduce income tax/employing workers/encourage risk taking behaviour |
4 points
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