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This lecture is from Chapter 28 - Sections 28.3-28.5 and Chapter 26

- Section 26.3 and 26.4 in - John Sloman, Dean Garratt, Jon Guest
and Elizabeth Jones, Economics for Business, Pearson Education
Ltd., (Seventh edition): 2016.

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 GDP: Gross Domestic Product ‫إجمالي الناتج املحلي‬
Definitions:
1. The value of output (or income or expenditure) in terms of
the prices actually paid. .‫قيمة الناتج )أو الدخل أو املصروفات( من حيث األسعار املدفوعة بالفعل‬
.‫ القيمة السوقية لجميع السلع والخدمات املنتجة في االقتصاد املحلي )إقليم بلد ما( خالل العام‬.2

2. The market value of all goods and services produced in the

domestic economy (territory of a country) during the year.
RGDP( Real Gross Domestic Product): The production of
goods and services valued at constant prices (is measured in
RGDP (‫)الناتج املحلي اإلجمالي الحقيقي‬: (‫يقاس في سنة األساس‬
ُ ) ‫إنتاج السلع والخدمات املقدرة باألسعار الثابتة‬.
base year).
NGDP( Nominal Gross Domestic Product): The production
of goods and services valued at current prices (is measured in
‫ الرقم القياسي ألسعار جميع‬:‫معامل انكماش الناتج املحلي اإلجمالي‬
current year). NGDP (‫)الناتج املحلي اإلجمالي االسمي‬: (‫إنتاج السلع والخدمات املقدرة باألسعار الجارية )يتم قياسه في السنة الحالية‬.
‫ أي جميع العناصر املساهمة‬:‫السلع والخدمات النهائية املنتجة محلًيا‬
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.‫تجاه الناتج املحلي اإلجمالي‬
GDP deflator:The price index of all final domestically
produced goods and services: i.e. all items that contribute 3
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 ‫توسع‬
‫ هناك زيادة في املؤشرات االقتصادية اإليجابية‬، ‫ في هذه املرحلة‬.‫املرحلة األولى في دورة األعمال هي التوسع‬
‫ يدفع املدينون بشكل عام‬.‫مثل العمالة والدخل واإلنتاج واألجور واألرباح والطلب وتوريد السلع والخدمات‬
‫ تستمر هذه العملية طاملا‬.‫ واالستثمار مرتفع‬، ‫ وتكون سرعة املعروض النقدي عالية‬، ‫ديونهم في الوقت املحدد‬
‫أن الظروف االقتصادية مواتية للتوسع‬
1. Expansion
The first stage in the business cycle is expansion. In this stage, there is an increase in
positive economic indicators such as employment, income, output, wages, profits,
demand, and supply of goods and services. Debtors are generally paying their debts
on time, the velocity of the money supply is high, and investment is high. This process
continues as long as economic conditions are favorable for expansion.
‫ الذروة‬.2
.‫ تم بلوغ الحد األقصى للنمو‬.‫ وهي املرحلة الثانية من دورة األعمال‬، ‫ أو الذروة‬، ‫ثم يصل االقتصاد إلى نقطة التشبع‬
‫ تشير هذه املرحلة إلى نقطة االنعكاس‬.‫ األسعار في ذروتها‬.‫املؤشرات االقتصادية ال تنمو أكثر وهي في أعلى مستوياتها‬
2. Peak .‫ يميل املستهلكون إلى إعادة هيكلة ميزانياتهم في هذه املرحلة‬.‫في اتجاه النمو االقتصادي‬

The economy then reaches a saturation point, or peak, which is the second stage of
the business cycle. The maximum limit of growth is attained. The economic indicators
do not grow further and are at their highest. Prices are at their peak. This stage marks
the reversal point in the trend of economic growth. Consumers tend to restructure their
‫ يبدأ الطلب على السلع والخدمات في االنخفاض بسرعة وبشكل مطرد في‬.‫الركود هو املرحلة التي تلي مرحلة الذروة‬
budgets at this point. ‫ مما يخلق حالة من فائض العرض‬، ‫ ال يالحظ املنتجون انخفاض الطلب على الفور ويستمرون في اإلنتاج‬.‫هذه املرحلة‬
‫ وبالتالي تبدأ جميع املؤشرات االقتصادية اإليجابية مثل الدخل واإلنتاج‬.‫ األسعار تميل إلى االنخفاض‬.‫في السوق‬
.‫واألجور وما إلى ذلك في االنخفاض‬
3. Recession
The recession is the stage that follows the peak phase. The demand for goods and
services starts declining rapidly and steadily in this phase. Producers do not notice the
decrease in demand instantly and go on producing, which creates a situation of excess
supply in the market. Prices tend to fall. All positive economic indicators such as
income, output, wages, etc., consequently start to fall.
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 .‫ فإن املرحلة تسمى الكساد‬، ‫ وبما أن هذا ينخفض إلى ما دون خط النمو املطرد‬، ‫ يستمر النمو في االقتصاد في االنخفاض‬.‫هناك ارتفاع متناسب في البطالة‬

4. Depression
There is a commensurate rise in unemployment. The growth in the economy continues
to decline, and as this falls below the steady growth line, the stage is called a
depression.

5. Trough
In the depression stage, the economy’s growth rate becomes negative. There is further
decline until the prices of factors, as well as the demand and supply of goods and
services, contract to reach their lowest point. The economy eventually reaches the
trough. It is the negative saturation point for an economy. There is extensive depletion
of national income and expenditure.

‫حوض الصغير‬
‫ وكذلك‬، ‫ هناك مزيد من االنخفاض حتى تنكمش أسعار العوامل‬.‫ يصبح معدل نمو االقتصاد سالبًا‬، ‫في مرحلة الكساد‬
‫ إنها نقطة‬.‫ االقتصاد يصل في النهاية إلى الحضيض‬.‫ لتصل إلى أدنى نقطة لها‬، ‫الطلب والعرض للسلع والخدمات‬
.‫ هناك استنفاد واسع النطاق للدخل القومي والنفقات‬.‫التشبع السلبية لالقتصاد‬
alhawd alsaghir

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 Unemployment
Unemployment can be expressed either as a number (e.g.
1.6 million) or as a percentage (e.g. 6 per cent).

Number unemployed (economist’s definition)

Those of working age who are without work, but who are
available for work at current wage rates.

Most countries have experienced long-term changes in

average unemployment rates

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 Labour force
 A person is considered employed if he or she has spent
most of the previous week working at a paid job.

 A person is unemployed if he or she is on temporary

layoff, is looking for a job, or is waiting for the start
date of a new job.

 A person who fits neither of these categories, such as a

full-time student, homemaker, or retiree, is not in the
labor force.
Labour force
The labor force is the total number of workers, including
both the employed and the unemployed
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Unemployment rate
The unemployment rate is calculated as the percentage of
the labor force that is unemployed.
Number unemployed
Unemployment rate =  100
Labor force

The labor-force participation rate

The labor-force participation rate is the percentage of the
adult population that is in the labor force.
Labor force participation rate

Labor force
  100
Adult population
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Example

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Definition used by the International Labour Organisation
(ILO) and the Organisation for Economic Co-operation and
Development (OECD)

Standardised unemployment rate

The measure of the unemployment rate used by the ILO and
the OECD. The unemployed are defined as persons of
working age who are without work, are available to start
work within two weeks and either have actively looked for
work in the last four weeks or are waiting to take up an
appointment.

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If 25 million people were employed and 1.5 million people
were unemployed, the unemployment rate would be

The standardised unemployment rate likely to be higher or

lower than the claimant unemployment rate.

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 Cost of unemployment
The personal costs of being unemployed. The longer
people are unemployed, the more dispirited they may
become.

Increase in domestic violence and the number of families

splitting up.

Unemployment represents a loss of output.

Underutilisation of resources leads to lower incomes for

other people too. 18
 The government loses tax revenues.
 The government incurs administrative costs associated
with the running of benefit offices.
 The government spend extra on health care, the social
services and the police.
 Firms lose the profits that could have been made if there
had been full employment.
 Other workers lose any additional wages they could have
earned from higher national output.

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 Unemployment and the labour market
Aggregate demand for labour curve
A curve showing the total demand for labour in the
economy at different average real wage rates.

Aggregate supply of labour curve

A curve showing the total number of people willing and
able to work at different average real wage rates

Disequilibrium unemployment
Unemployment resulting from real wage rates in the
economy being above the equilibrium level
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Equilibrium unemployment (or natural
unemployment)
There may be excess demand for labour (vacancies) in
some markets and excess supply (unemployment) in others.

Frictional (search) unemployment

Unemployment that occurs as a result of imperfect
information in the labour market. It often takes time for
workers to find jobs (even though there are vacancies) and
in the meantime they are unemployed.

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Structural unemployment
Unemployment that arises from changes in the pattern of
demand or supply in the economy. People made redundant
in one part of the economy cannot immediately take up jobs
in other parts (even though there are vacancies).

Technological unemployment
Structural unemployment that occurs as a result of the
introduction of labour-saving technology.

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Regional unemployment
Structural unemployment occurring in specific regions of
the country.

Seasonal unemployment
Unemployment associated with industries or regions where
the demand for labour is lower at certain times of the year.

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 Inflation

Deflation: falling price level.

Annual inflation rate: annual percentage increase in

price level.

Broader measure of inflation: rate at which the prices

of all domestically produced goods and services are
changing. 24
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Example

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Inflation rates in selected industrial economies,
1965–2010

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The costs of inflation
Redistribution.
Inflation redistributes income away from those on fixed
incomes and those in a weak bargaining position, to those
who can use their economic power to gain large pay, rent
or profit increases.

Uncertainty and lack of investment.

Inflation tends to cause uncertainty among the business
community, especially when the rate of inflation
fluctuates.
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Balance of payments.
Inflation is likely to worsen the balance of trade. If a
country suffers from relatively high inflation, its exports
will become less competitive in world markets.

Resources.
Extra resources are likely to be used to cope
with the effects of inflation.

The costs of inflation may be relatively mild if inflation is

kept to single figures. They can be very serious, however,
if inflation gets out of hand (hyperinflation).
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Causes of inflation
Demand-pull inflation is caused by continuing rises in
aggregate demand.
Associated with a booming economy.

Demand-deficient or cyclical unemployment

Disequilibrium unemployment caused by a fall in
aggregate demand with no corresponding fall in the real
wage rate.

When the economy is in recession, demand-deficient

unemployment is high, but demand-pull inflation is low. 34
Cost-push inflation
Associated with continuing rises in costs and hence
continuing leftward (upward) shifts in the AS curve. Such
shifts occur when costs of production rise independently of
aggregate demand.

Expectations and inflation

Workers and firms take account of the expected rate of
inflation when making decisions.

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