This document contains lecture notes on macroeconomics topics including the natural rate of unemployment, types of unemployment (frictional, seasonal, structural), efficiency wages, unemployment insurance, and minimum wage laws. Key points covered are the definition of the natural rate of unemployment, how different types of unemployment like structural can be caused by changes in technology or demand, the potential unintended consequences of policies like unemployment insurance and minimum wages, and how efficiency wages can make employees more productive.

2. Lecture 11
Macroeconomics

3. Quiz 7: Sec__ Name__________
1. What is $800 five years from now worth
to you today and why?
2. What will $300 be worth in seven years
if it grows at 7 percent interest?

4. Frédéric Bastiat
(1801-1850)
There is only one
difference between a bad
economist and a good
one: the bad economist
confines himself to the
visible effect; the good
economist takes into
account both the effect
than can be seen and
those effects than must be
foreseen.
What is Seen andWhat in
Not Seen, 1850

5. Natural Rate of
Unemployment
The normal rate of
unemployment around
which the unemployment
rate fluctuates

6. Cyclical
Unemployment
The deviation of
unemployment from its
natural rate

7. Three Types of
Unemployment
Frictional
Seasonal
Structural

8. Frictional
Unemployment
Time to find a new
job

9. Seasonal
Unemployment
Demand changes
with the season

10. Structural
Unemployment
Too many workers
Change in Demand

13. What kind of
unemployment
is caused by
smartphones?

14. Structural
Unemployment
Creative
Destruction
10% a year

15. Unemployment
Insurance
Government program to
provide income when
workers become
unemployed

16. Unemployment
Insurance
Unintended Consequence
Moral Hazard
May prolong unemployment

17. Minimum Wage Laws
Government sets a
minimum wage that can
legally be paid
Price Floor

18. $0
$5
$10
$15
$20
0 10 20 30 40 50 60
Supply
Demand
Wage
Workers
Equilibrium
Wage
30 workers
30 jobs
no
unemployment
Minimum Wage
40 workers
20 jobs
20 unemployed
workers
Minimum Wage
20 workers
get a raise
10 workers
lose job
10 new
unemployed
workers
Minimum
Wage

19. Efficiency Wages
Higher wages make more
productive employees

20. Efficiency Wages
Employee Wage Pizzas Productivity
Wage per Pizza
Bob $10 5 $2.00
Bill $20 12 $1.67

21. Efficiency Wages
More Healthy
Lower Turnover
Higher Quality
More Effort

22. 3,000 people live in Pooleynesia. There are
250 people under 16. 450 people are not
in the labor force. 230 people are
unemployed.
1. What is the Labor Force Participation
Rate?
2. What is the Unemployment Rate?

23. Population 3,000
Under 16 250
Adults 2,750
Not in the Labor Force 450
In the Labor Force 2,300 83.6%
Labor Force Participation Rate
Labor Force ÷ Adults
Employed 2,070
Unemployed 230 10.0%
Unemployment Rate
Unemployed ÷ Labor Force

24. 110,400 people are employed. The
unemployment rate is 8 percent.
1. How many are in the Labor Force?
2. How many are Unemployed?