Cyclical refers to the year to year fluctuations in

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Unformatted text preview: leading to unemployment. Types of Unemployment contd… • Seasonal Unemployment: Unemployment caused because of the seasonal nature of employment – tourism, skiing, cricketers, beach lifeguards, etc. • Cyclical: Refers to the year-to-year fluctuations in unemployment around its natural rate. Deals with short-term fluctuations associated with the ups and downs of the business cycle. = Unemp rate - Natural unemp rate either a recession or boom Types of Unemployment contd… frictional + structural • Natural Unemployment Rate = F + S represents persistent joblessness that does not go away on its own even in the long run. Refers to the amount of unemployment that the economy normally experiences. • Full Employment = when the unemployment rate is equal to the natural unemployment rate. Application of unemployment: Minimum Wage Price of Labor wages Supply Equilibrium without Minimum Wage Demand Quantity of Labor in the labor market, supply is the # of people want to work while the demand is the demand from companies for the workers Price of Labor Supply PM Minimum Wage Law Established Demand QD QS Quantity of Labor Price of Labor Supply PM Surplus or Unemployment QD QS Demand Quantity of Labor Economic Growth • Increases in Real GDP {(Real GDPcurrent year – Real GDPearly year)/ Real GDPcurrent year} * 100 earlier • A positive number indicates that the economy has grown from one year to the next Business Cycles • Represents fluctuations of economic activity • Involves shifts over time between periods of relatively rapid growth of output and periods of relative stagnation or decline • Often measured using real GDP Ups and downs of the Business Cycle • Peak: at the peak of the business cycle, Real GDP is at a temporary high. • Contraction: A decline in the real GDP. If it falls for two consecutive quarters, it is said to be in a recession. • Trough: The Low Point of the GDP, just before it begins to turn up. • Recovery: When the GDP is rising from the trough. • Expansion: when the real GDP expands beyond the recovery Components of business cycles...
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This note was uploaded on 11/28/2010 for the course ECON 201 taught by Professor Dr.sharma during the Spring '08 term at Ohio State.

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