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Economic Instability

Economic Instability. Chapter 14. Section 1: Business Cycles and Fluctuations. Objective 1: Explain the phases of the business cycle. Objective 2: Identify five causes of business cycles. Phases of the Business Cycle. Recession (begins with peak and ends at a trough)

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Economic Instability

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  1. Economic Instability Chapter 14

  2. Section 1: Business Cycles and Fluctuations • Objective 1: Explain the phases of the business cycle. • Objective 2: Identify five causes of business cycles.

  3. Phases of the Business Cycle • 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

  4. Great 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

  5. Causes of Great Depression • Disparity in distribution of income (DIDOI) • Easy and plentiful credit (EAPC) • Global economic conditions (foreign loans/high tariffs) GEC

  6. Causes of the Business Cycle • Capital Expenditures • Inventory Adjustments • Innovation and Imitation • Monetary Factors • External Shocks

  7. Predicting Business Cycles • Econometric model-uses algebraic equations • Index of leading indicators

  8. Section 2: Unemployment • Objective 1: Explain how the Bureau of Labor Statistics determines if a person is employed. • Objective 2: Describe five kinds of unemployment.

  9. Measuring 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

  10. Measuring Unemployment cont. • Limitations of unemployment rate-does not count labor force “dropouts”/considered employed even when they hold part-time jobs

  11. Kinds of Unemployment • Frictional

  12. Kinds of Unemployment • Structural

  13. Kinds of Unemployment Since I’m unemployed due to this recession, I better not buy this new dishwasher! • Cyclical

  14. Kinds of Unemployment • Seasonal

  15. Kinds of Unemployment • Technological

  16. Full Employment • Does not mean zero unemployment • Lowest possible unemployment rate • Drops below 4.5% • 9.7% in August 2009

  17. Occupational Outlook Handbook • http://www.bls.gov/oco/

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