- adverse selection of wage cuts argument
- if employers reduce wages for all workers, the best will leave
- cyclical unemployment
- unemployment closely tied to the business cycle, like higher unemployment during a recession
- depreciation
- the process by which capital ages over time and therefore loses its value
- discouraged workers
- those who have stopped looking for employment due to the lack of suitable positions available
- double counting
- a potential mistake to be avoided in measuring GDP, in which output is counted more than once as it travels through the stages of production
- durable good
- long-lasting good like a car or a refrigerator
- efficiency wage theory
- the theory that the productivity of workers, either individually or as a group, will increase if they are paid more
- final good and service
- output used directly for consumption, investment, government, and trade purposes; contrast with “intermediate good”
- frictional unemployment
- unemployment that occurs as workers move between jobs
- gross domestic product (GDP)
- the value of the output of all goods and services produced within a country in a year
- gross national product (GNP)
- includes what is produced domestically and what is produced by domestic labor and business abroad in a year
- implicit contract
- an unwritten agreement in the labor market that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the business is strong
- insider-outsider model
- those already working for the firm are “insiders” who know the procedures; the other workers are “outsiders” who are recent or prospective hires
- intermediate good
- output provided to other businesses at an intermediate stage of production, not for final users; contrast with “final good and service”
- inventory
- good that has been produced, but not yet been sold
- labor force participation rate
- this is the percentage of adults in an economy who are either employed or who are unemployed and looking for a job
- Lorenz curve
- a graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis
- national income
- includes all income earned: wages, profits, rent, and profit income
- natural rate of unemployment
- the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time
- net national product (NNP)
- GNP minus depreciation
- nondurable good
- short-lived good like food and clothing
- out of the labor force
- those who are not working and not looking for work—whether they want employment or not; also termed “not in the labor force”
- relative wage coordination argument
- across-the-board wage cuts are hard for an economy to implement, and workers fight against them
- service
- product which is intangible (in contrast to goods) such as entertainment, healthcare, or education
- structure
- building used as residence, factory, office building, retail store, or for other purposes
- structural unemployment
- unemployment that occurs because individuals lack skills valued by employers
- trade balance
- gap between exports and imports
- trade deficit
- exists when a nation’s imports exceed its exports and is calculated as imports –exports
- trade surplus
- exists when a nation’s exports exceed its imports and is calculated as exports – imports
- underemployed
- individuals who are employed in a job that is below their skills
- unemployment rate
- the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs
- quintile
- dividing a group into fifths, a method often used to look at distribution of income
