Economics DeMYSTiFieD

chapter 12Unemployment

Unemployment, like GDP, is an important indicator of the health of the macroeconomy. In order to make the goods and services that a country produces, firms need workers. All else equal, then, we expect more people to be working when an economy is making more goods and services and fewer people to be working when an economy is making fewer goods and services. Thus, it’s intuitive that the number of people working, or rather not working, can be a good indicator of how close an economy is to producing its full potential. While everybody is familiar with the idea of the unemployment rate, many people lack a real understanding of what unemployment is, how it is measured, how to interpret it, and the caveats we need to consider ...