Focus Question: How does supply and demand impact unemployment and inflation?

Topics on the Page
 

Aggregate Supply
 

Aggregate Demand
 

Types of Unemployment
 

Technological Unemployment

• Dramatic Event page:  Robotics in the Workplace

Universal Basic Income



Aggregate Supply: the total supply of goods and services available to a particular market from producers

- it also measures the amount of goods and services produced within the economy at a specific price.

There are two types of Aggregate Supply:

1. Short Run Aggregate Supply
2. Long Run Aggregate Supply

Short Run Aggregate Supply (shifts)
Can be caused by:

• changes in unit labor costs
• commodity prices
• Government taxation and subsidy

Aggregate Demand: the total demand for goods and services within a particular market

 
The Purpose of Aggregate Supply and Aggregate Demand is that it models the effects of economic changes on the economy as a whole

• Click here for a Khan Academy video on aggregate demand and supply

• Click here for a Khan Academy lesson on aggregate supply and demand

Unemployment

Unemployment Rate from the Bureau of Labor Statistics

Types of Unemployment

• Structural
• Resulting from industrial reorganization, usually technological change
• Example: Web-based advertising and services in newspaper industry eliminates jobs for journalists, printers and delivery personnel

• Frictional
• Resulting from workers in the process of moving from one job to another
• Example: Construction workers moving to warmer states during the winter

• Cyclical
• Resulting from shifts in the economy such as business downturns or shifts in consumer demands
• Example: Lost of jobs in the building trades during the 2008 Housing Crisis

Link here to see unemployment broken down by age, race, and gender

Link here for an article on women and unemployment

Link here for a timeline of the unemployment rate in the US

Technological Unemployment

Robotics in the Workplace

First Cigarette Rolling Machine, 1881

Technological Unemployment and the Future of Work, Wall Street Journal (November 6, 2015)

• Agricultural workers declined from 41% of population in 1900 to 2% in 2000

• What will happen to manufacturing and other jobs due to automation?

French paper card, 1909

• Five Reasons Why A Basic Income Won't Solve Technological Unemployment, Social Europe Blog (February 4, 2016)

Universal Basic Income

• Is Universal Basic Income the Answer to an Automated Future, Big Ideas and Innovation Blog (December 12, 2016)

• 47 percent of jobs are at risk of being automated by machine learning, Robotics, 3D printing and Artificial Intelligence resulting in technological unemployment

• Universal Basic Income, also called guaranteed minimum income, is one solution
• Experiments underway in Finland, Netherlands, and India

Inflation

Understanding Cost-Push and Demand-Pull Inflation

• Cost-push inflation is the decrease in the aggregate supply of goods and services stemming from an increase in the cost of production.
• Demand-pull inflation is the increase in aggregate demand, categorized by the four sections of the macroeconomy: households, business, governments, and foreign buyers.
• An increase in the costs of raw materials or labor can contribute to cost-pull inflation.
• Demand-pull inflation can be caused by an expanding economy, increased government spending, or overseas growth.

Solutions to Inflation

Works Cited:
http://tutor2u.net/economics/revision-notes/as-macro-aggregate-supply.html