The Impact of Immigration and Labor Markets on Wages and Full Employment - Prof. Eftila Ta, Study notes of Introduction to Macroeconomics

Download The Impact of Immigration and Labor Markets on Wages and Full Employment - Prof. Eftila Ta and more Study notes Introduction to Macroeconomics in PDF only on Docsity! © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez The Economy at Full Employment FERNANDO QUIJANO, YVONN QUIJANO, KYLE THIEL & APARNA SUBRAMANIAN PREPARED BY: c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez WAGE AND PRICE FLEXIBILITY AND FULL EMPLOYMENT7.1 • classical models Economic models that assume wages and prices adjust freely to changes in demand and supply. Understanding Full Employment c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez THE PRODUCTION FUNCTION7.2 c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez THE PRODUCTION FUNCTION7.2  FIGURE 7.2 An Increase in the Stock of Capital c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez  FIGURE 7.3 The Demand and Supply of Labor WAGES AND THE DEMAND AND SUPPLY FOR LABOR7.3 • real wage The wage rate paid to employees adjusted for changes in the price level. Labor Market Equilibrium c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez  FIGURE 7.5 Determining Full-Employment Output LABOR MARKET EQUILIBRIUM AND FULL EMPLOYMENT7.4 • full-employment output The level of output that results when the labor market is in equilibrium and the economy is producing at full employment. c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez LABOR SUPPLY VARIES ACROSS COUNTRIES AND TIME APPLYING THE CONCEPTS #2: Why are differences in the amount of labor supply across countries an important determinant of economic performance? Although work may be universal, the amount of work done varies substantially and consequently affects output. Example: vacation time. •A typical worker in the United States has 12 days of vacation. •The United Kingdom: 28 vacation days Germany: 35 days Italy: 42 days Per capita output is higher in the United States than in Germany. But if Germans worked as many hours as their U.S. counterparts, per capita output would be similar in both countries. Within the United States, the amount of work we do has changed substantially over time. In the last 50 years: • The labor force participation rate has increased from 59 to 67 percent. • Labor force participation of women has increased from 34 percent to nearly 60 percent. • The labor force participation of men has fallen from 86 to 75 percent. c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez  FIGURE 7.6 How Employment Taxes Affect Labor Demand and Supply USING THE FULL-EMPLOYMENT MODEL7.5 Taxes and Potential Output c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez DIVIDING OUTPUT AMONG COMPETING DEMANDS FOR GDP AT FULL EMPLOYMENT7.6 International Comparisons c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez DIVIDING OUTPUT AMONG COMPETING DEMANDS FOR GDP AT FULL EMPLOYMENT7.6 Crowding Out in a Closed Economy • crowding out The reduction in investment (or other component of GDP) caused by an increase in government spending. • closed economy An economy without international trade. output = consumption + investment + government purchases Y = C + I + G c h a p te r © 2007 Pearson/Prentice Hall Economics: Principles, Applications, and Tools, 5e O’Sullivan • Sheffrin • Perez DIVIDING OUTPUT AMONG COMPETING DEMANDS FOR GDP AT FULL EMPLOYMENT7.6 Crowding Out in a Closed Economy  FIGURE 7.8 U.S. Consumption and Government Spending During World War II