Definitions/EquationsNon‐InstitutionalPopulation‐ thenumberofpeoplepotentiallyavailableforcivilianemploymentLaborForce‐ thesumofthoseemployedandunemployedParticipationRate‐ theratioofthelaborforcetothenoninstitutionalcivilianpopulationUnemploymentRate‐ theratioofthenumberofunemployedtothelaborforceSeparations‐ workerswhoareleavingorlosingtheirjobsHires‐workersnewlyemployedbyfirmsQuits‐workersleavingtheirjobsforwhattheyperceiveasbetteralternativesLayoffs‐workerswholosetheirjobseithertemporarilyorpermanentlyDiscouragedWorkers‐ apersonwhohasgivenuplookingforemploymentCollectiveBargaining‐ wagebargainingbetweenunionsandfirmsReservationWage‐ theagethatwouldmakethemindifferentbetweenworkingorbeingunemployedEfficiencyWage‐ thewageatwhichaworkerisperformingajobmostefficientlyorproductivelyAggregateNationalWage‐ seetheequationbelow

, ,

Theexpectedpricelevel Theunemploymentrate Acatchallvariable thatstandsforallothervariablesthatmayaffecttheoutcomeofwagesetting

- Theaggregatenationalwage dependsonthreefactors:

ProductionFunction‐ therelationbetweenthequantityofoutputandthequantitiesofinputusedinproduction

PriceDetermination‐ howafirmdeterminesthepriceofagoodorservice,where ismarkup

1

Wage‐SettingRelation‐ therelationbetweenthewagechosenbywagesetters,thepricelevel,andtheunemploymentrate

,

,

Price‐SettingRelation‐ therelationbetweenthepricechosenbyfirms,thenominalwage,andthemarkup

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NaturalRateofUnemployment‐ theunemploymentrateatwhichpriceandwagedecisionsareconstant

Chapter 6- The Labor Market

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NaturalRateofEmployment‐ thelevelofemploymentthatprevailswhenunemploymentisequaltoitsnaturalrate

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NaturalLevelofOutput‐ thelevelofproductionthatprevailswhenemploymentisequaltoitsnaturallevel

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