Labor Market in the Macroeconomy

The Labor Market: Basic Concepts

The Department of Labor and Employment (DOLE) prepare reports regarding the results of a household survey that provides an estimate of the number of people with a job, the employed (E), as well as the number of people who are looking for work but cannot find a job, the unemployed (U). The labor force (LF) is the number of employed plus unemployed:     

LF = E + U

The unemployment rate is the number of people unemployed as a percentage of the labor force:

                           

Unemployment rate = unemployed / labor force

To repeat, to be unemployed, a person must be out of a job and actively looking for work. When a person stops looking for work, he or she is considered out of the labor force and is no longer counted as unemployed. It is important to realize that even if the economy is running at or near full capacity, the unemployment rate will never be zero.

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Aggregate Demand and Aggregate Supply (AD-AS Model)

Aggregate Demand (AD) Curve is the the curve that shows the level of real GDP purchased by households, businesses, government, and foreigners (net exports) at different possible price levels during a time period, ceteris paribus.

Source: Principles of Economics by Tucker.

On the other hand, Aggregate Supply (AS) Curve is the curve that shows the level of real GDP produced at different possible price levels during a time period, ceteris paribus.

Source: Principles of Economics by Tucker.

Non-price level determinants affecting the shift of AD ans AS are summarized below:

Source: Principles of Economics by Tucker

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