KEY TERMS

aggregate demand for labor, p. 110 aggregate supply of labor, p. 110 chronically unemployed, p. 127 cyclical unemployment, p. 127 diminishing marginal productivity, p. 100

discouraged workers, p.

duration, p. 123

employment ratio, p. 122 factors of production, p. 94 frictional unemployment, p. 126 full-employment level of employment, p. 117 full-employment output, p. 119 income effect of a higher real wage, p. 112

labor force, p. 122

leisure, p. 111

marginal product of capital (MPK), p. 98

marginal product of labor (MPN), p. 100

marginal revenue product of labor (MRPN), p. 104

natural rate of unemployment, p. 127

Okun's law, p. 130

participation rate, p. 122 production function, p. 94 productivity, p. 93

real wage, p. 105

structural unemployment, p. 127 substitution effect of a higher real wage, p. 112

supply shock, p. 101

total factor productivity, p. 95 unemployment rate, p. 122 unemployment spell, p. 123

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