Chapter 8

Chapter 8 - Chapter 8 Unemployment and Inflation 'sGDP...

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Chapter 8: Unemployment and Inflation   The unemployment rate tends to rise when the increase of an economy's GDP  is less than the increase of the economy's potential GDP. For example, if actual  GDP stays constant while potential GDP grows, the unemployment rate will tend  to increase. The increase in unemployment will be particularly large if actual GDP  falls from one year to the next, as it did between Year 7 and Year 8.       The trough occurs when the economy's GDP stops falling and starts to rise, as  it did in Year 3.     Leading indicators are variables that change before real GDP changes. That is,  in a business cycle, leading indicators reach their peak (or trough) before the  peak of an expansion and hit a trough (or peak) prior to the trough of a recession,  with similar upward and downward patterns.  Lagging indicators are variables that change after real GDP changes. That is, in  a business cycle, lagging indicators reach their peak (or trough) after the peak of  an expansion and hit a trough (or peak) after the trough of a recession, with  similar upward and downward patterns. 
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This note was uploaded on 01/23/2010 for the course ECN 72570 taught by Professor Mendez during the Fall '09 term at ASU.

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Chapter 8 - Chapter 8 Unemployment and Inflation 'sGDP...

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