Business Cycle Intro

Business Cycle and Unemployment

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Expansionary Phase

• GDP is Rising

• Unemployment Is Falling

• Inflation at some point begins to grow

Peak

• GDP is at its highest

• Unemployment is low

• Inflation tends to be high

Contractionary

• GDP is falling

• Unemployment will increase

• Inflation will eventually decrease (disinflation) and then possible deflation

• 2 Consecutive quarters of negative GDP = Recession

Trough

• GDP is at its lowest

• Unemployment is high

• Very low inflation or deflation

• 
  

Multiple Choice

The business cycle is made up of how many phases?

• 6

• 8

• 2

• 4

Multiple Choice

Economic recovery begins-

• at the peak of the business cycle

• at the beginning of the expansion period

• During a recession

Multiple Choice

The Business Cycle measures ___ over time.

• wealth

• inflation

• economic growth

Multiple Choice

During which phase of the business cycle is GDP at its highest?

• Expansionary

• Peak

• Trough

• Contractionary

Multiple Choice

During which phase of the business cycle is unemployment decreasing and inflation rising?

• expansionary

• Peak

• Trough

• Contractionary

Miscellaneous

• Average duration of cycle is 7-8 years

• Products that do well during a recession are necessities and cheap products

• Products that do well during an expansion are luxuries, durable goods, more expensive goods

Multiple Choice

What phase of the business cycle are we in today?

• Expansionary

• Recessionary

• Peak

• Trough

Employment

Jobs with greatest projected growth.

Unemployment

• Goal is 4-6%. This is considered full employment

• Why not greater than 6%?

• Why not less than 4%

Types of Unemployment

• Structural- the basis of the economy is changing.

• Frictional- In between jobs, looking for a better job, just got out of college, and looking for a job.

• Cyclical- based on changes in thh business cycle

• Seasonal- caused by a change in weather or prevailing conditions of the job.

Natural Rate of Unemployment

This is just the combination of Frictional and Structural. This occurs in an economy all the time-no matter the business cycle phase. It amounts to 4-6%. That is why 4-6% is considered fully employed.

Multiple Choice

Unemployment is?

• Workers that are actively looking for a job but aren’t working.

• The percentage of people in the labor force who want a job but are not working.

• Temporary unemployment or being between jobs.

• Changes in the labor force make some skills obsolete

Multiple Choice

The Unemployment Rate is?

• Workers that are actively looking for a job but aren’t working.

• The percentage of people in the labor force who want a job but are not working.

• Temporary unemployment or being between jobs.

• Changes in the labor force make some skills obsolete.

Multiple Choice

Temporary unemployment or being between jobs.

Individuals are qualified workers with transferable skills.

• Cyclical Unemployment

• Structural Unemployment

• Frictional unemployment

Multiple Choice

The US is at full employment when there is____ % unemployment.

• 7-9%

• 0%

• 0-2%

• 4-6%

Multiple Choice

Nick quits his job at Hannaford in order to find a better job. What type of unemployment is this?

• Cyclical

• Frictional

• Structural

Multiple Choice

Steve was laid off from his job at the Town Park in October. This is what type of unemployment

• Cyclical

• Frictional

• Seasonal

Calculating the Unemployment Rate

Unemployed/Labor Force

Unemployed = do not have any job AND are actively searching for a job during the last 4 weeks.

Labor Force = Unemployed + Fully Employed + Part-Time Workers

Government contacts 60,000 households for a monthly survey. Amounts to about 110,000 people.

Who is not in the Labor Force?

• Discouraged Workers

• Military

• Homeless

• Full Time Students

• Institutionalized

• Retired

Multiple Choice

The US economy adds a net 100,000 jobs in October and the unemployment rate increased. How is this possible?

• More workers than 100,000 become discouraged

• More than 100,000 workers go from being discouraged to actively looking.

• More than 100,000 workers leave the Labor Force

Multiple Choice

If GDP is decreasing, unemployment tends to_____________?

• Increase

• Decrease

Multiple Choice

When the economy experiences an expansion, it is most likely the case that

• GDP is increasing, unemployment is increasing, and inflation is decreased

• GDP is decreasing, unemployment is decreasing, and inflation is increasing.

• GDP is increasing, unemployment is decreasing, and inflation is increasing

• GDP is decreasing, unemployment is decreasing, and inflation is decreasing.