Professional Documents
Culture Documents
McGraw-Hill/Irwin
LO1
27-2
How do business
cycles work?
LO1
27-3
Expansion
Peak
Contraction
Trough
LO1
27-4
LO1
27-5
Peak
Rec
ess
io
an
si
on
th
w
o
r
G
n
Re
ces
sio
n
Ex
pa
ns
i on
d
Tren
Trough
Ex
p
Peak
Trough
Time
LO1
27-6
LO1
27-7
27-8
Cyclical Impact
LO1
27-9
Unemployment
LO2
27-10
Measurement of Unemployment
LO2
27-11
LO2
Unemployment Rate =
Unemployment/Labor Force x
100
LO2
27-13
Types of Unemployment
LO3
26-14
LO2
Frictional unemployment
-workers who are either searching for jobs or
waiting to take jobs in the future
Structural unemployment
-workers who find that their skills and experience
have become obsolete or unneeded thus find
that they have no marketable talents
Cyclical unemployment
- Caused by a decline in total spending
- Results from insufficient demand for goods and
services
27-15
LO3
26-16
GDP Gap
Above the natural rate means that
LO3
26-17
Okuns Law
Indicates that for every 1 percent-
LO3
26-18
Unequal Burdens
Occupation
Age
Race and ethnicity
Gender
Education
Duration
LO3
26-19
Noneconomic Costs
LO3
26-20
Noneconomic Costs
LO3
mental illness
Can lead to violent social and political
change
26-21
Inflation
LO3
26-22
Inflation
of money
Consumer Price Index (CPI)
CPI =
CPI =
LO3
207.3
201.6
201.6
x
x
100
100
= 2.8%
26-23
Types of Inflation
Demand-Pull inflation
Excess spending relative to output
Central bank issues too much
LO3
money
Cost-Push inflation
Due to a rise in per-unit input costs
Supply shocks
26-24
Complexities
LO3
26-25
Complexities
LO3
26-26
Core Inflation
LO3
26-27
Nominal income
Number of dollars received as
LO3
26-28
26-29
Anticipation
The redistribution effects of inflation
depend whether or not it is
expected
LO3
26-30
LO3
26-31
Fixed-income receivers
Savers
Creditors (Lenders)
LO3
26-32
Who is Unaffected(Helped) by
Inflation?
Unanticipated
Inflation redistributes real income
towards them and away from the
others
LO3
26-33
Unanticipated inflation
Flexible-income receivers
Social Security recipients
COLAs
Union members
Debtors
Pay back the loan with cheaper
dollars
LO3
26-34
Anticipated inflation
Anticipated inflation
The redistribution effects of inflation
are less severe are eliminated if
people anticipate inflation
LO3
26-35
Anticipated inflation
LO3
26-36
LO3
LO3
Cost-push inflation
Reduces real output
Redistributes a decreased level of
LO3
real income
Demand-pull inflation
One view is that zero inflation is
best
Another view is that mild inflation is
best
26-39
Hyperinflation
LO3
26-40