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Print this chapterMacroeconomics: The Big Picture
Read this chapter and attempt the "Try It" exercises. Also, complete the concept problems and the numerical problems at the end of the chapter. In the first section of this chapter, you will read about the definition of Gross Domestic Product and some of the issues around measuring it. You will also learn about the 4 phases of the business cycle. As you will see, the economy goes through naturally alternating periods of economic growth and recession. You will review certain sections of this chapter later in the unit.
3. Unemployment
LEARNING OBJECTIVES
- Explain how unemployment is measured in the United States.
- Define three different types of unemployment.
- Define and illustrate graphically what is meant by the natural level of employment. Relate the natural level of employment to the natural rate of unemployment.
For an economy to produce all it can and achieve a solution on its production possibilities curve, the factors of production in the economy must be fully employed. Failure to fully employ these factors leads to a solution inside the production possibilities curve in which society is not achieving the output it is capable of producing.
In thinking about the employment of society's factors of production, we place special emphasis on labor. The loss of a job can wipe out a household's entire income; it is a more compelling human problem than, say, unemployed capital, such as a vacant apartment. In measuring unemployment, we thus focus on labor rather than on capital and natural resources.