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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