Lecture 13 Notes

Lecture 13 Notes - ECN 211 Macroeconomic Principles L13:...

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03/03/10 1 ECN 211 Macroeconomic Principles L13: Unemployment and Inflation
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03/03/10 2 Output, Unemployment and Inflation Questions: What are business cycles? How is unemployment defined and measured? What is the cost of unemployment?
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03/03/10 3 Business Cycles … pattern of rising real GDP followed by falling real GDP Recession … a period in which real GDP falls Usually at least 2 quarters to a year Depression … a severe and prolonged economic contraction “the great depression in the 30’s” Around 25% of the labor force was unemployed.
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03/03/10 4 Trend growth has been around 3-4% per year (on average) Real GDP begins to _____ Real GDP begins to _______
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03/03/10 5 Expansion (boom) – real GDP is increasing Contraction – real GDP is decreasing
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03/03/10 6 Indicators of the Business Cycle Leading Indicator … a variable that changes before real output changes Used to forecast changes in output Not always successful! Examples: consumer expectations and Stock prices “stock prices have predicted 9 of the last 5 recessions.” Coincident Indicator … a variable that changes at the same time that real output changes Example: industrial production and Personal income
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Lagging Indicator … a variable that changes after real output changes Example: unemployment duration, labor cost per unit of output. 03/03/10 7
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03/03/10 8 What Causes Business Cycles? Keynesians – too little demand Neo-Classicals – ‘mistakes’ = temporary output and price anomalies Schumpeterians – cycles of ‘creative destruction’
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03/03/10 9 Unemployment Official Unemployment Rate
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This note was uploaded on 03/03/2010 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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Lecture 13 Notes - ECN 211 Macroeconomic Principles L13:...

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