STUDY GUIDE

Unemployment

1.Describe the history of unemployment.

2.Describe the Classical and the Keynesian explanation of unemployment.

3.Clearly understand:

a.Target rate of unemployment/natural unemployment

b.Potential output

c.Capacity utilization rate

d.Structural unemployment/skills gap

e.Frictional unemployment

f.Cyclical unemployment

g.Seasonal unemployment

h.Induced unemployment

i.Sticky wages

j.Discouraged workers

k.Under -employment

l.Okun's Rule of Thumb

m.Contingency labor force

n.Disguised unemployment

o.Primary and secondary labor market

Aggregate demand and supply

1.Define the Aggregate Demand curve and explain the negative slope of the AD curve.

2.Define the Aggregate Supply curve and explain its slope.

3.Describe the different ranges in the AS curve

4.Describe the policy implications of the Keynesian and the Classical ranges of the AS curve.

5.Describe what happens to the Price level and the National output when aggregatedemand increases in the Keynesian, Intermediate and the Classical range in the AS curve.

6.What is a AD shortfall?What are its consequences and policy implications?

7.What is a AD excess?What are its consequences and policy implications?