Indexation

Involves trying certain payments to the rate of

increase in price inflation to keep their real value
constant

Inflation

Refers to a general and sustained rise in the level of

goods and services in the economy

The dependent population

They depend on the labour force to produce and

supply the goods and services they need and want

Unemployed

The number of people registered as being without

work and as a proportion on the total labour force
(the unemployment rate)

Employment status

The number of people employed full-time, part-time

or in temporary work

The labour force participation rate

Measures the percentage of the working age

population that is either in work or looking for work
and is therefore able to produce goods and services

Frictional Unemployment

Occurs as workers leave one job and spend time

looking for a new one

Seasonal unemployment

Occurs because consumer demand for some goods

and services is seasonal

Cycical Unemployment

Occurs when there is too little demand for the goods

and services in the economy during an economic
recession

Structural unemployment

Arises from long-term changes in the structure of an

economy as entire industries in an economy
closedown because of a lack of demand for the
goods and services they produce or because
production is moved to countries overseas because
cost is cheaper

Unemployment rate

Measures the percentage of people in its labour force

that are without work and recorded as unemployed,
usually measured by the number of people clamming
welfare and unemployment benefits

Technological Unemployment

Regional unemployment

When machinery replaces manual labour in many

modern production process

Structural change can cause this if most firm in the

affected industries and located in one particular area

Cost push inflation

Inflation caused by rising production costs passed on by firms to consumers. The cost of
producing goods and services can rise because workers demand increases in wages don't
matched by increased productivity. Firms may raise their prices to cover the highest coasts
so that their profit margins are unchanged. However, as wages rise the demand for labour
will tend to fall and workers could be made unemployed. To prevent a rise in
unemployment the government may expand the supply of money to boast aggregated
demand.Continual increases in prices may occur if workers demand further increases in
wages to compensate them for rising prices.
Demand pull inflation
Inflation caused by an increase in total demand in an economy will rise if spending by
governments, households, and/or firms increases. An increase in aggregated demand will
cause market prices to increase and inflation to rise if firms are unable to increase the
supply of goods and services at the same rate as demand. To finance an increase in AD
consumers and firms may borrow more from the banking system and government can
issue more notes and coins. bOth increase in demand involve increasing the supply of
money

Cost push Inflation

Demand pull inflation

Occupational immobility- The inability of workers to move easily between different

occupations because they lack transferable skills
Cost push inflation *^ - Persistently rising price levels caused by rising production coast
Indexation- The automatic adjustment of a monetary variable, such as wages or pensions,
by the change in CPI, so that its value rises at the same rate as inflation
Deflation- A sustained decrease of general price level in an economy
Demand pull inflation *^ - A persistent increase in general level in of prices resulting from a
continued excess of aggregate demand over aggregated supply
Base year- The year used as the reference point or beginning of a consumer price index,
in which the average price of a typical basket of goods and services is assigned the
number 100
Imported inflation- A sustained increase in the prices of brought from overseas
Disinflation- A slowdown rate at which the general price level is rising over time
The labour force- The employed plus the unemployed
The dependent population- Those who are not employed or unemployed

Benign deflation

Cyclical unemployment