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Key concepts (7) - Coggle Diagram
Key concepts (7)
Chapter 9
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Inactive population
People in the population of working age who are neither employed nor actively looking for paid work. Those working in the home raising children, for example, are not considered as being in the labour force and therefore are classified this way
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Labour force
The number of people in the population of working age who are, or wish to be, in work outside the house-hold. They are either employed (including self-employed) or unemployed
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Wage-setting curve
The curve that gives the real wage necessary at each level off economy-wide employment to provide workers with incentives to work hard and well
Unemployment rate
The ratio of the number of the unemployed to the total labour force (note that the employment rate and unemployment rate do not sum to 100%, as they have different denominators)
Real wage
The nominal wage, adjusted to take account of changes in prices between different time periods. It measures the amount of goods and services the worker can buy.
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Employment rent
The economic rent a worker receives when the net value of her job exceeds the net value of her next best alternative (that is, being unemployed) Also known as cost of job loss
Nash equilibrium
A set of strategies, one for each player in the game, such that each player's strategy is a best response to the strategies chosen by everyone else
Nominal wage
The actual amount received in payment for work, in a particular currency. Also known as money wage
Chapter 9
Involuntary unemployment
The state of being out of work, but preferring to have a job at the wages and working conditions that otherwise identical employed workers have
Monetary policy
Central bank or government actions aimed at influencing economic activity through changing interest rates or the prices of financial assets
Cyclical unemployment
The increase in unemployment caused by a fall in aggregate demand associated with the business cycle. Also known as demand-deficient unemployment
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Excess supply
A situation in which the quantity of a good supplied is greater than the quantity demanded at the current price
Trade union
An organization consisting predominantly of employees, the principal activities of which include the negotiation of rates of pay and conditions of employment for its members
Equilibrium unemployment
The number of people seeking work but without jobs, which is determined by the intersection of the wage-setting and price-setting curves. This is the Nash equilibrium of the labour market where neither employers nor workers could do better by changing their behaviour.
Reservation wage
What an employee would get in alternative employment, or from an unemployment benefit or other support, were he or she not employed in his or her current job
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Incomplete contracts
A contract that does not specify, in any enforceable way, every aspect of the exchange that affects the interests of parties to the exchange (or of others)
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