Summary

=Summary =

** Section 1: Unemployment **

Unemployment is an important macroeconomic issue because it hurts the economy as a whole. Economists measure unemployment by identifying the number of employed and the number of unemployed and by determining the unemployment rate. The unemployment rate is the percentage of people in the civilian labor force who do not have jobs but are actively seeking employment. It is not entirely accurate, however, because it doe not include the number of people who either lack jobs but have stopped looking for work or who are underemployed. Four major types of unemployment exist: frictional unemployment, structural unemployment, seasonal unemployment, and cyclical unemployment. Although some frictional and structural unemployment occurs even in a healthy economy, unemployment in general has great economic and social costs.


 * Section 2: Inflation **

Economists analyze price fluctuations by examining the price level, inflation, and deflation. The price level influences aggregate supply, or total production throughout the economy, and aggregate demand, or total spending and investment throughout the economy. Inflation is an increase in the average price level of all goods and services in the economy, and deflation is a decrease in the average price level of products. Inflation caused by demand growing faster than supply is known as demand-pull inflation. Inflation caused by rising production costs is known as cost-push inflation. Economists use both the consumer price index (CPI) and the producer price index (PPI) to measure the amount of price fluctuations. These price indexes estimate the inflation rate, or the pace at which price level increases. Inflation affects the purchasing power of the dollar, the value of real wages, interest rates, saving and investing, and production costs.


 * Section 3: Poverty and Income Distribution **

Growing income inequality in the United States can be seen in a large gap between the incomes of the rich and the poor. The Census Bureau classifies people as living in poverty if their total income falls below designated income levels known as the poverty threshold. This threshold is determined largely by the cost of food. The poverty rate is the percentage of people in the total population who are living in poverty. The Lorenz Curve illustrates how a nation's distribution of income differs from a perfectly proportional distribution of income. The Gini Index provides a statistical measure of income inequality. Economists believe that the income gap has grown for a variety of reasons. First, the composition of households in the United States has changed. Second, the labor market has changed. Third, technology has caused dramatic shifts in employment and income. Fourth, the growth of a global economy has encouraged many U.S. companies to relocate production to other countries.