Chapter Learning Objectives

  • Define the concepts of voluntary and involuntary unemployment.
  • Understand the practical difficulties that are inherent in measuring the unemployment rate.
  • Recognize the broad patterns of unemployment that are observed in the U.S. data.
  • Recognize why downwardly rigid wages play such a critical role in generating persistent unemployment in the competitive supply-demand framework.
  • Understand the distinction between real and nominal wage rigidity.
  • Recognize the basic principles that underlie the efficiency wage hypothesis and understand the shirking variant of this approach.