Chap 13 Notes 2011 12 BLANK by 6GRR8e58

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									                                   Chapter 13 – Economic Challenges

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Three economic challenges discussed in this chapter:

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Section 1: Economic Challenges - Unemployment

       ▫   Unemployment has a variety of causes.

                  Some level of unemployment is expected, even when an economy is healthy.

       ▫    Underemployed—____________________________________________________

•   Measuring Unemployment: The Unemployment Rate

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       ▫   Includes ______________________________________________________________________

       ▫   Does not include military, those in prison, those who are not seeking a job.

•      Full Employment

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                  people relocate; look for better job; can’t find appropriate job

       ▫   Unemployment rate of _______________ considered full employment in U.S.

                  other rates in countries with different labor markets, economic policies

Types of Unemployment

•      Type 1: Frictional Unemployment

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       ▫   Includes:

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        ▫   Reflects workers’ freedom to find best job for them at the _____________________

•       Type 2: Seasonal Unemployment

        ▫   Demand for some jobs _______________________________________

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•       Type 3: Structural Unemployment

        ▫   As businesses become more efficient, ____________________________________________

                   new technologies ______________________________________________________

                   new industries _________________________________________________________

                   change in consumer demand _____________________________________________

                   offshore outsourcing sometimes __________________________________________

•       Type 4: Cyclical Unemployment

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Section 2: Poverty and Income Distribution

What Is Poverty?

    •   The Poverty Threshold

            ▫   People considered in poverty if ______________________________________

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            ▫   Calculated based on costs of nutritious food, other necessities

    •   The Poverty Rate

            ▫   Poverty rate—________________________________________________________

                       based on population as a whole
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        ▫   Poverty does not hit all sectors of society equally. Most at risk:

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•   Factors Affecting Poverty

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•   Income Distribution

        ▫   Income distribution—_________________________________________________________

        ▫   Income inequality—__________________________________________________________

•   Assistance for people in poverty

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                   card can be used only to buy food at grocery stores

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                   money usually spent in own communities, helping boost their economies

•   General Antipoverty Programs

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Section 3: Inflation

    •   Definition of inflation:

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    •   Effect 1: ____________________________________________________

            ▫   Rising consumer price index represents declining value of the dollar

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                          each dollar they have buys less every year

            ▫   Inflation helps people who borrow at a fixed rate of interest

    •   Effect 2: ____________________________________________________

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            ▫   Monthly credit card payments go up as rates rise

    •   Effect 3: ____________________________________________________

            ▫   Interest on savings tends to increase during inflationary times

            ▫   Any interest you earn on investments is worth less than it was before
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Chapter 13 Case Study: The Effects of Inflation in the 1970s

    Background

            In the 1970s, the United States experienced the longest period of inflation in its history. By 1979,
            inflation had risen to 10 percent per year or higher. Prices of consumer goods rose dramatically.
            Those on fixed incomes were particularly affected.



    What’s the Issue

            How did inflation affect people and businesses in the 1970s?



    Thinking Economically

        1. Name one example from each document that shows how inflation has a negative impact on the
           economy.




        2. Inflation is a general rise in price levels. Are the examples of price increases in documents B and C
           symptoms of inflation or isolated price increases?




        3. Compare the tone of documents A and C. Do economists care as much about inflation as
           consumers? Explain.

								
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