chaptertwentytwo - Ch 22 Monitoring Cycles Jobs and the...

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Ch. 22 Monitoring Cycles, Jobs, and the Price Level The Business Cycle - A business cycle has two phases—expansion and recession—and two turning points – peak and trough. - One definition of recession is a two-quarter decrease in real GDP. - National Bureau of Economic Research definition: A recession is a significant decline inactivity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough . Between trough and peak, the economy is in an expansion . - Real GDP is the broadest measure of economic activity, and another popular working definition of a recession is a decrease in real GDP that lasts for at least two quarters. - The broadest monthly indicator of economic activity is employment, along with others that include personal incomes, sales of manufactures, and industrial production. - Business Cycle Dates o On the average, recessions have lasted for just over a year and real GDP has fallen from peak to trough by more than 6%. Expansions have lasted for almost 4 years on average, and real GDP has increase from trough to peak by an average of 22%. o Expansions last much longer than recessions. Expansions are the normal state of the economy. Recessions are relatively short-lived interruptions of that normal process. o It is normal for real GDP to remain below its pre-recession peak for some time after an expansion begins. Jobs and Wages - Population Survey o Current Population Survey: used by the Census Bureau to describe the anatomy of the labor force. It divides the population into two groups: the working-age population and others who are too young to work or who live in institutions and are unable to work. Working age population: the total number of people aged 16 years and over who are not in jail, a hospital, or some other form of institutional care. Divides the working-age population into two groups: those in the labor force and those not in the labor force. Divides the labor force into two groups: the employed and the unemployed. Labor force : sum of the employed and the unemployed. To be counted as employed, a person must have either a full-time job or a part-time job. To be counted as unemployed, a person must be available for work and must be in one of three categories: 1. Without work but has made specific efforts to find a job within the previous four weeks.
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2. Waiting to be called back to a job from which he or she has been laid off. Waiting to start a new job with in 30 days. People in the working-age population who are neither employed nor unemployed are classified as not in the labor force.
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