宏经inflationandunemployment.pptVIP

Chapter 30 Unemployment and Inflation Zhao Hongjun PhD Department of International Economy and Trade E-mail: hjzhao2002@163.com Office: Room 342, College of IET Topics we will discuss Unemployment Inflation A. Unemployment Unemployment The employed: people with jobs The unemployed: people without jobs but looking for jobs Those not in the labor force: people without jobs who are not looking for jobs Labor force Kinds of unemployment Frictional unemployment: arises because of the incessant movement of people between regions, jobs in order to find better jobs Voluntarily unemployed, exists even at full employment Structural unemployment: arises because of mismatch between the supply of and demand for workers, arises from structural reasons ex. Computer industrial, textiles industries Cyclical unemployment: occurs during recessions, when employment falls as a result of an imbalance between AS and AD Voluntary unemployment: flexible wages Involuntary unemployment inflexible wages Why wages inflexible? Sticky prices/wages Wage contract Government administration Unionized labor market Labor market are no clearing in the short run Impacts of unemployment Less of goods and services,GDPpotential GDP Loss of income wealth Psychological pressure Okun’s law For every 2% that GDP falls relative to potential GDP, the unemployment rate rises about 1% B. Inflation Inflation: occurs when the the general level of prices is rising Categories of inflation Low inflation Galloping inflation Hyperinflation Anticipated inflation, no output effect Unanticipated inflation, output effect in the short run Demand-pull inflation Cost-push inflation Expectation and inertial inflation Phillips curve Philips, △Wt=f(ut) Reason: △Wt=+f(L-Ld*) △Ut=-g(L-Ld*) P=H(Wt) Policy: inflation↑↓→ut↓↑ Why Philips curve shift? AD↑→a-b→expectation P ↑ →As↓→Ld↓→ut↑ The impact of inflation Redistribution effects of inflation Hur