chapter 6 homework question 6: harry keyser question 10: kevin kasparitis question 14: fabian lemp...
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Chapter 6 homework
• Question 6: Harry Keyser
• Question 10: Kevin Kasparitis
• Question 14: Fabian Lemp
• Question 16: Thomas Trevor
• Alternate: Jon Manning
Theory in Action…
• http://news.yahoo.com/s/afp/20070221/ts_alt_afp/usjapanautocompany_070221002126;_ylt=AmGijEzozUCCr8_ei2B8UdrlyREB Nissan Offers Voluntary Layoffs at Tennessee Plants Applied Topics: Derived demand, determinants of the demand for labor, production function
• The article examines Nissan's recent offer to workers. • Questions: • How is Nissan's offer to its workers for "buyouts" related to the
concept of derived demand? • How is it possible that the productivity of Nissan's workers has
increased but that the demand for labor at Nissan has decreased? (Hint: Is the production function the same for the new mix of vehicles to be produced this year as compared to 2006?)
Chapter 7
Unemployment and Employment
How Governments Increase Unemployment
• The U.S. government attempts to reduce the effects of frictional unemployment with unemployment insurance Benefits provided to people who
• are unemployed through no fault of their own
• are ready, willing and able to work
• are actively seeking work
How Governments Increase Unemployment (cont’d)
• Does unemployment insurance reduce the opportunity cost of not working too much??? Remain unemployed for a longer period than they
would if they didn’t receive it
Some research says Yes
• In Europe, where unemployment benefits are more generous, unemployment rates are higher than in the U.S.
Figure 7.3 Average Unemployment Rates in Selected Industrial Economies: 1990–2004
The Social Consequences of Unemployment
• Economists and sociologists have noted that rising unemployment is associated with: Increased crime More domestic violence A higher incidence of mental illness Falling marriage and birth rates
The Social Consequences of Unemployment (cont’d)
• Unemployment also results in lost output for society as a whole. Less people working less output produced
• The relationship between unemployment and GDP is known as Okun’s Law: A 1% rise in the unemployment rate above the full
employment unemployment rate causes GDP to fall by about 2.5%.
Immigrants and Unemployment
• Does immigration take away jobs from U.S. citizens? Some research suggests a negative impact
on native-born workers.
A country with high wages will attract immigrants
• Shift the supply of labor curve to the right Drive wages down.
Figure 7.4 The Impact of Immigration on Domestic Wages and Employment
Immigrants and Unemployment
• But…really it is more complex. Immigrants may take jobs that native-
workers are unable or unwilling to take.
Trade and Unemployment
• What happens if the U.S. tries to keep wages and employment high by restricting immigration or trade? May cause an increase in imports of goods
and services from lower-wage counties. Restricting trade through tariffs and quotas
can lead to higher prices for consumers. Other countries may retaliate by keeping out
U.S. made goods and services.
Strategy and Policy
• It all depends on how you count: In July of 2004, the BLS reported that the
economy had added 150,000 fewer jobs than had been expected, and yet the unemployment rate fell from 5.6% to 5.5%.
• Two problems: The employment data is collected from an
establishment survey of 160,000 businesses and governmental agencies.
The unemployment rate is based on a household survey.
Playing with the numbers
• During the last presidential election both candidates (Bush and Kerry) picked out what they thought would help them from these numbers Kerry: addition of 150,000 fewer jobs
economy recovery slowing down Bush: unemployment rate fell from 5.6 to
5.5 economy showing steady improvement
Chapter 7 homework
• Numbers 2, 4, 10, 14, 16
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