Chapter 14

Objective 1: Explain the phases of the business cycle.

Objective 2: Identify five causes of business cycles.

Recession (begins with peak and ends at a trough)

Expansion-a period of recovery from a recession and continues until the economy reaches a new peak

If recession and expansion do not occur, steady growth is known as a trend line.

Depression

Date 1929-1933 GDP fell from $103 to $55

billion Number out of work rose nearly 800%-

1.6 to 12.8 million Wage from .55 hr to .05 hr Depression scrip

Disparity in distribution of income (DIDOI)

Easy and plentiful credit (EAPC) Global economic conditions (foreign

loans/high tariffs) GEC

Capital Expenditures Inventory Adjustments Innovation and Imitation Monetary Factors External Shocks

Econometric model-uses algebraic equations

Index of leading indicators

Objective 1: Explain how the Bureau of Labor Statistics determines if a person is employed.

Objective 2: Describe five kinds of unemployment.

Unemployment rate-number of unemployed individuals divided by the total number of persons in the civilian labor force

Unemployed-people available for work who made a specific effort to find a job during the past month and worked less than one hour for pay or profit or worked in a family business without pay for less than 15 hrs. a week

Limitations of unemployment rate-does not count labor force “dropouts”/considered employed even when they hold part-time jobs

Frictional

Structural

CyclicalSince I’m

unemployed due to this recession, I

better not buy this new dishwasher!

Seasonal

Technological

Does not mean zero unemployment Lowest possible unemployment rate Drops below 4.5% 9.7% in August 2009

http://www.bls.gov/oco/