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chap08lecture notes - CHAPTER EIGHT MACROECONOMIC...

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CHAPTER EIGHT MACROECONOMIC INSTABILITY: UNEMPLOYMENT AND INFLATION INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to: 1. Explain what is meant by a business cycle. 2. Describe the four phases of an idealized business cycle. 3. Identify two types of non-cyclical fluctuations in business activity. 4. Describe how innovation and/or random events might cause business cycles. 5. Explain why cyclical impact affects capital and consumer durable goods industries more than consumer non-durable goods industries. 6. State causes of frictional, cyclical, and structural unemployment. 7. Define the full employment or natural rate of unemployment. 8. Describe how unemployment is measured by the Bureau of Labor Statistics (BLS). 9. Evaluate strengths and limitations of BLS unemployment statistics. 10. Identify the economic costs of unemployment and the groups that bear unusually heavy unemployment burdens. 11. Define inflation and list two types of inflation. 12. Describe the predicted outcome of increased total demand on employment and inflation in ranges 1, 2, and 3 when presented with the diagram. 13. List three groups that are hurt and two groups that may benefit from unanticipated inflation. 14. Present three possible effects of inflation on output and employment. 15. Compare U.S. inflation and unemployment rates to one or more industrialized nations. 16. Define and identify terms and concepts at the end of the chapter. LECTURE NOTES I. Recent Examples of Macroeconomic Instability A. The 1980 inflation rate was 13.5 percent. B. Real output fell by 3.3 percent during one 16-month period in the early 1980s. C. Unemployment increased by 3 million from 1980 to 1982. D. Inflation in 1986 was 1.9 percent, but had risen to 4.8 percent by 1989. E. Output turned down in 1990-91 for the eighth time since 1950. II. Overview of the Business Cycle 102
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Macroeconomic Instability: Unemployment and Inflation A. Historical record: 1. The United States’ impressive long-run economic growth, technological progress, living standards among the best in world. 2. Uneven growth has been the pattern, with inflation often accompanying rapid growth, and unemployment and output declining during periods of recession and depression (see Figure 8-1 in text) page 148. B. Four (4) Phases of the business cycle over a several-year period: 1. A peak is when business activity reaches a temporary maximum with full employment and near capacity output. 2. A recession is a decline in total output, income, employment, and trade lasting six months or more. 3. The trough is the bottom of the recession period. 4. Recovery is when output and employment are expanding toward full-employment level. C.
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This note was uploaded on 07/09/2008 for the course ECON 102 taught by Professor Hewit during the Summer '07 term at Philadelphia Biblical.

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chap08lecture notes - CHAPTER EIGHT MACROECONOMIC...

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