Download 14-1, pp 375-380,business cycles, 14-2, pp 382-387

14-1, P.P. 375-380,BUSINESS
CYCLES, 14-2, P.P. 382387,UNEMPLOYMENT
MAIN IDEAS:(14-1)THE TERM BUSINESS CYCLE
REFERS TO ALTERNATING INCREASES AND
DECREASES IN THE LEVEL OF ECONOMIC
ACTIVITY; (14-2)FUNCTIONAL, SEASONAL,
CYCLICAL, AND TECHNOLOGICAL ARE THE
GENERAL TYPES OF UNEMPLOYMENT
BUSINESS CYCLES IN THE U.S.
• RECESSION PHASES (GDP DECLINES
FOR TWO QUARTERS) STARTS AT
PEAK, ENDS WHEN AT A TROUGH,
THEN, EXPANSION AS ECONOMY
RECOVERS.
• DEPRESSION-A SEVERE RECESSION
WITH MANY UNEMPLOYED AND
FACTORIES LYING IDLE.
BUSINESS CYCLE (CON’T.)
• THE GREAT DEPRESSION-LASTED
FROM 1929 UNTIL WWII BEGAN. PANIC
CAUSED RUNS ON BANKS AND THE
STOCK MARKET.
• CAUSES-MANY POOR AND A FEW
WEALTHY (INCOME GAP), EASY
CREDIT, GLOBAL TRADE FELL OFF.
CAUSES OF THE BUSINESS
CYCLE
• CAPITALEXPENDITURES-AMOUNT OF
MONEY BUSINESSES SPEND.
• INVENTORY ADJUSTMENTS-CHANGES IN
THE LEVEL OF BUSINESS INVENTORY.
• INNOVATION AND IMITATION
• MONETARY FACTORS-CREDIT AND LOAN
POLICIES OF THE FED (FEDERAL RESERVE
BANK)
• EXTERNAL SHOCK-EXAMPLE: OIL PRICE
INCREASES.
PREDICTING BUSINESS
CYCLES
• INDEX OF LEADING INDICATORS-A
MONTHLY STATISTICAL SERIES
WHICH WILL USUALLY TURN DOWN
BEFORE REAL GDP TURNS DOWN.
• ECONOMETRIC MODEL-USES
ALGEBRAIC EQUATIONS.
14-2, UNEMPLOYMENT
• MEASURING IT-UNEMPLOYMENT RATE
• UNEMPLOYED-PEOPLE WHO MADE AN
EFFORT WITHIN THE LAST MONTH TO FIND
A JOB.
• LIMITATIONS OF THE UNEMPLOYMENT
RATE-DOESN’T COUNT THOSE WHO HAVE
QUIT LOOKING, PEOPLE CONSIDERED
EMPLOYED WHEN HOLDING PART TIME
JOBS.
TYPES OF UNEMPLOYMENT
• FRICTIONAL-BETWEEN JOBS;SHORT-TERM
UNEMPLOYED
• STRUCTURAL-WHEN A FUNDAMENTAL CHANGE IN
THE ECONOMY REDUCES THE DEMAND FOR
WORKERS AND THEIR SKILLS.
• CYCLICAL-RELATED TO SWINGS IN THE BUSINESS
CYCLE.
• SEASONAL-RESULTS FROM CHANGE IN WEATHER
OR CHANGE IN DEMAND FOR A CERTAIN
PRODUCT.
• TECHNOLOGICAL-AUTOMATION (WORKERS
REPLACED BY MACHINES
FULL EMPLOYMENT
• WHEN UNEMPLOYMENT RATE GOES
UNDER 4.5 PERCENT, IT IS
CONSIDERED FULL EMPLOYMENT