Lecture Macroeconomics (19/e) - Chapter 9: Business cycles, unemployment, and inflation

After reading this chapter, you should be able to: Describe the business cycle and its primary phases, illustrate how unemployment and inflation are measured, explain the types of unemployment and inflation and their various economic impacts.

Inflation 09

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in economic activity over time

Time

Peak

Peak

Peak

Reces sion

Rece ssio

n

Ex pa

ns io

on

Trough

Trough Grow th

Trend

decreases in output and employment

Under 16 and/or Institutionalized (71.4 million)

Not in labor force (81.7 million)

Employed (139.9 million)

Unemployed (14.3 million)

Total

population

(307.3

million)

Labor force (154.2 million)

Unemployment rate =

14,265,000 154,142,000

X 100 = 9.3%

Unemployment rate =

# of unemployed labor force

X 100

counted as if full-time

counted as unemployed

waiting to take jobs soon

structure of the demand for labor

the business cycle

unemployment

or fall below the NRU

GDP

creates a 2% GDP gap

Economic Cost of Unemployment Economic Cost of Unemployment

Unequal Burdens

mental illness

change

Global Perspective

power” of money

CPI

Price of the Most Recent Market Basket in the Particular Year

Price estimate of the Market

Basket in 1982-1984

CPI 207.3 - 201.6

201.6

money

inflation

Percentage change in real income =

Percentage change in nominal income

Percentage change in price level

deteriorates

dollars”

dollars”

real income

best

best