BsCycle,Unem,Infla-post (1)

BsCycle,Unem,Infla-post (1) - What do we call 2 or more...

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Unformatted text preview: What do we call 2 or more What quarters of a decline in GDP? Chapter 8 Chapter Unemployment, Inflation and Economic Fluctuations In business cycle theory, what is a trend line? 1. A movement from recession to expansion 2. A movement from expansion to recession 3. The average growth rate of the business cycle 4. The movement from one peak to the next peak 1. Recession 2. Depression 3. Inflation 4. Stagflation Chapter 8 — Unemployment, Economic Fluctuations and Inflation • On average, since 1900, our real GDP has increased about 3 % per year…but it’s not a stable growth year… it’ rate (it IS, however, an upward trend). • What is a business cycle? (3.5%) Phases of the business cycle • • • • • • • Peak Contraction Trough Expansion Trend line—generally an upward trend – line— (AVERAGE growth rate of GDP) Recession — 2 or more qtrs. of decline in real GDP Depression — a big recession! (prolonged & severe) What are some of the Economic What indicators that help determine the business cycle? 1. Civilian Labor Force — no. of people, 16 and older who are either employed or unemployed (looking for a job). LF = U + E 2. Unemployed — person who does not have a job but who is Actively seeking a job (but how do you Actively decide who is ACTIVELY SEEKING A JOB?) or waiting to begin or return to a job. waiting return 3. Unemployment RATE – No. Unempl. X 100 No. in LF What are some of the Economic indicators that help determine the business cycle? 4. Labor Force Participation Rate – no. of people 16 yrs. of age or older who are employed or unemployed as a percentage of the total civilian population, 16 yrs. or older. – More developed nations have higher LFPR. – Countries with lower LFPR generally have a small no. of married women in the LF (as a percent) (as . No. of 16+ in LF) X 100 No. of 16+ (non-instit.) in population (non- (as a percent) (as 4. Labor Force Participation Rate What are some of the Economic indicators that help determine the business cycle? 5. Employment/Population rate – no. of 16+ employed citizens as a percent of total 16+ population. – Rises during an expansion, falls during a recession. – More easily defined than “actively seeking a job” so job” Class Activity 8.2 • Do we want zero unemployment? or • Is some unemployment good for an economy? may be better measurement than unemployment rate. No. of employed 16+ in LF . X 100 employed No. of 16+ (non-instit.) in population (non- Types of Unemployment 1. Natural Rate of Unemployment – healthy rate of unemployment (desired rate) generally: 4% -- 6% a. Frictional — ”between jobs” unemployment -jobs” unemployment that results from a lack of information in the labor market…..skills DO match jobs ….just market… ..skills have not FOUND the right job yet. b. Structural — unemployment caused by changes in the structure of the economy (changes in S & D conditions) (skills do NOT match jobs) (skills jobs) – – – Please explain. (as a percent) (as Ex. ↓ in D for Amer. Made cars but ↑in D for American made computers (not trained yet for computer work) Often more regional in nature Can result from changes in technology—creative destruction technology— Types of Unemployment 1. Natural Rate a. Frictional unemployment- (skills match jobs) unemploymentb. Structural unemployment — (skills do not match jobs) not – – Changes in S & D conditions conditions Changes in technology (tech. unempl – creative destruction) technology • JOHN DEERE tree cutting machine – creative destruction Activity 8.2 – Describe some of the jobs that machine replaced. How many jobs do you think it will create? Will they be in the same place? (the same part of the country) Will they be in the same COUNTRY? John Deere 1270-D John 1270- Types of Unemployment 1. Natural Rate 1. a. Frictional unemployment- (skills match jobs) unemploymentb. Structural unemployment — (skills do not match jobs) not – – Changes in S & D conditions conditions Changes in technology (tech. unempl – creative destruction) technology • JOHN DEERE tree cutting machine – creative destruction – Seasonal unemployment (ski instruc. In summer, lifeguards in winter, agricultural workers) – Public Sector Unemployment (Policy Induced Unempl.) – changes in gov’t policy that lead to unemployment gov’ ↑ Space program = ↓ unemployment ↓ Space Program = ↑ unemployment ↑ Defense spending = ↓ unemployment 2. Cyclical Unemployment In the video from Ch. 17, when Shirley lost her job at the Levi’s plant due to outsourcing Levi’ and had to retrain herself as a secretary, what type of unemployment did she suffer from? 1. Cyclical 2. Frictional Types of Unemployment 1. Natural Rate a. Frictional b. Structural 2. Cyclical unemployment — • unemployment that results when the entire economy is doing poorly (recession)… (recession)… • AGGREGATE Demand has decreased, not just ↓ in D in one industry…unemployment industry… will be prolonged. PRS Which of the following people are unemployed? 1. Yes 2. No 3. Structural 4. Policy Induced 20 year old looking for 1st job Which of the following people are Which unemployed? 1. Yes 2. No Which of the following people are unemployed? 1. Yes 2. No College student attending school full time Stay at home mom Which of the following people are unemployed? Which of the following people are unemployed? 1. Yes 2. No 60 year old former steel worker who wants to work but has given up actively seeking employment Which of the following people are unemployed? 1. Yes 2. No Laid off construction worker waiting to return to previous job 1. Yes 2. No Economist who returned to graduate school after failing to find job Which of the following people are unemployed? 1.Yes 1.Yes 2.No 2.No School administrator who has been working as a substitute teacher one day a week while looking for a full time job in administration The US has had a substantial increase in The unemployment over the past 2 years. Most of that increase in unemployment is classified as what type? 1. Cyclical INFLATION — a continual increase in the average price level which leads to a decrease in purchasing power of money • Why study about inflation? – German Hyperinflation of 1920s – Zimbabwe today 2. Frictional What causes inflation? 3. Structural 4. Policy Induced Zambia Reissued Reissued currency at $1 : $10 Billion new : old INFLATION — a continual increase in the average price level which leads to a decrease in purchasing power of money • Why study about inflation? German Hyperinflation of 1920s What causes inflation? • Aggregate D > Aggregate Supply— Supply— but what causes THAT?? • Increase in the GR of our real money supply over and above any increase in real output Here’s Germany…what does US money supply look like? Here’ Germany… How does the U.S. get money into the economy? (to increase the money supply) 1. Drops money out of an airplane. 2. Drops money out of a helicopter. 3. The Money Fairy 4. The Full Monty From our CPI, how do we determine the inflation RATE? From What is the “Money Fairy”? It describes Fairy” the process by which 1. the U.S. government borrows money. 2. Banks create money through the loan process. 3. Hyperinflation is brought under control by decreasing the money supply. 4. Money is printed by the U. S. Bureau of Printing and Engraving. How to determine the RATE of Inflation 1. We already know ONE way to do it…. it… OLD CPI yr. desired X 100 Old CPI of New Base Yr. How to determine the RATE of Inflation 1. We already know ONE way to do it…. it… OLD CPI yr. desired X 100 Old CPI of New Base Yr. Year 2000 2001 CPI 115 126.5 NEW CPI. 100 (126.5/115) * 100 = 110 But once you HAVE That number…what is the inflation number… rate? 10% How to determine the RATE of Inflation 1. Inflation RATE (% Δ in CPI): CPI): current CPI – previous CPI previous CPI (part/whole) X 100 2. OR a second way to determine the RATE of Inflation current CPI – previous CPI X 100 previous CPI Part/whole Year 1980 1990 2000 2001 CPI 80 100 115 126.5 INFLATION RATE --XX---XX-(100 - 80) / 80 = .25 X 100 = . How to determine the RATE of Inflation How For Practice: 1. Inflation RATE (% Δ in CPI): CPI): current CPI – previous CPI previous CPI Year 1980 1990 2000 2001 CPI 80 100 115 126.5 X 100 INFLATION RATE --XX---XX-- . 25% 15% 15% (126.5 – 115) / 115 = .10 X 100 = 10% Year 1995 1996 1997 1998 1999 CPI 153.5 168.5 161.3 163.9 168.3 Inflation Rate --XX---XX-_______ _______ _______ _______ (100 - 80) / 80 = .25 X 100 = (115 - 100) / 100 = .15 X 100 = Types of Inflation Types • Unanticipated Inflation — more Find inflation rate, either of 2 ways. What is the inflation rate for 2001? IT’s in IT’ percentage terms, but just enter the NUMBER (not the % sign). damaging….do not take steps to prepare damaging… – Investment suffers (bank loans, too risky) – Use resources to PREDICT inflation. Instead of to produce things • Anticipated Inflation — can prepare & plan End of Chapter 8 Year Year 1990 2000 CPI 115 126.5 ...
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This note was uploaded on 04/02/2012 for the course ECO 2013 taught by Professor Slate during the Fall '10 term at Florida State College.

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