Module 12
The Meaning
and Calculation
of Unemployment
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
What you will learn
in this Module:
• How unemployment is measured
• How the unemployment rate is calculated
• The significance of the unemployment rate
for the economy
• The relationship between the
unemployment rate and economic growth
Labor force participation rate =
Labor force
 100
Population age 16 and older
Defining and Measuring
Unemployment
•Employed
•Unemployed
•Labor Force
•Labor Force Participation Rate
•Unemployment Rate
The Significance of the
Unemployment Rate
• Indicator of employment opportunity
• Overstating the true level of unemployment
• Understating the true level of unemployment
• discouraged workers
• marginally attached workers
• underemployed
The Significance of the
Unemployment Rate
2007
Growth and Unemployment
• Recessions and unemployment
• Economic expansions and unemployment
• Except
• Relationship between economic growth and
unemployment
Figure 12.1 The U.S. Unemployment Rate, 1948–2010
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 12.2 Alternative Measures of Unemployment, 1994–2010
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 12.4 Unemployment and Recessions, 1978–2010
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 12.5 Growth and Changes in Unemployment, 1949–2009
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
July
2007
Unnumbered Figure 12.1 Rocky Mountain Low
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers