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Introduction to Economics

UNEMPLOYMENT AND

INFLATION

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Four Types of Unemployment1. Frictional unemployment 2. Seasonal unemployment3. Structural unemployment4. Cyclical unemployment  

•Full employment: when there is only frictional and structural unemployment Natural rate of unemployment

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Labour Force•People who are:1. Adults (15+)2. Willing to work3. Able to work4. Actively looking for a job (if not working)

Discouraged workers

Labour force = employed + unemployed

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Adult Population vs. Labour Force

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ExampleYou are given the following information about a society:•Adult population: 27,700•Labour force: 18,500•Employed: 17,000

Find:a.Labour force participation rate b.Unemployment rate

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Unemployment & Underemployment•Underemployment:•Overqualified •Willing to work more hours

•Productivity

•Cost of unemployment Economic Non-economic

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Canadian Unemployment by Sex and Age

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Labour Force Participation by Gender

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Rate of Unemployment by Province

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Inflation•Winners vs. losers

Only if unanticipated•Why is inflation bad?•Unplanned redistribution of income•Distortion of price signals•Uncertainty and instability Especially when high → less predictable•Wealth is turned from productive assets into less productive assets