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Unemployment Supplement to Reffonomics

Unemployment Supplement to Reffonomics. Clarifications. “Full-Employment Unemployment Rate” A.K.A. “Natural Rate of Unemployment” Full-Employment is achieved when there is zero CYCLICAL unemployment There is always some degree of Structural and Frictional Unemployment!

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Unemployment Supplement to Reffonomics

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  1. Unemployment Supplement to Reffonomics

  2. Clarifications • “Full-Employment Unemployment Rate” • A.K.A. “Natural Rate of Unemployment” • Full-Employment is achieved when there is zero CYCLICAL unemployment • There is always some degree of Structural and Frictional Unemployment! • So, even if the Natural rate of unemployment is 4%, if there is currently zero cyclical unemployment, then the economy is said to be “fully-employed.”

  3. Delaware unemployment rate: August of 2001 through August of 2010 Year-beginning in 2001

  4. Delaware Unemployment Data as of August 2010 • Civilian Labor Force: 422,700 • Employed persons: 386,800 • Unemployed persons: 35,300 • Unemployment Rate: (Unemployed persons / Civilian labor force) X 100 = 8.35% • Population of Delaware: 885,122 (2009 est.)

  5. Economic Costs of Unemployment • GDP Gap – the difference that exists between actual GDP and potential GDP as a result of fluctuations in unemployment and it’s effect on production.

  6. Okun’s Law • Establishes a relationship between unemployment rate and GDP gap. • “for every 1 percentage point which the actual unemployment rate exceeds the natural rate, a GDP gap of about 2 percent occurs.” • NOT A TRUE LAW! Not accurate 100% of cases.

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