Econ 141 Dr. Mohammed Alwosabi www.umm.

biz

Chapter 2
BUSINESS CYCLE AND LABOR MARKET
‫ورة ا! د وق ا‬$‫ا‬
BUSINESS CYCLE: ‫ورة ا! د‬$‫ا‬
Economic activity is measured using RGDP. But economic activity is not constant. It
fluctuates ups and downs for different reasons. These ups and downs are called business
cycle (or economic cycle). ‫اث ا! د‬$'(‫* *س ا‬+*‫ آ‬-./‫ة ا‬$'‫ ا‬01 2‫آ در‬
GH/. ‫ى‬45‫ أ‬7‫ إ‬2 9: ;<= >?‫ وآ*; أ‬،0-*-A‫ ا‬0BC‫ ا‬0<A‫ ا‬DE2‫ ا‬-4F.
>*/? : ‫ن ه‬-2‫دة وا‬I‫ ا‬JKL1 M-2 :‫ وإ‬$I :N1 ،‫اث ا! د‬$'(‫ ا‬01 4*O‫ا‬
.‫ورة ا! د‬$‫ا‬

RGDP is the market value of the total production measured in the constant (base year)
prices. RGDP eliminates the influence of inflation and determines how much production
has grown from one year to another. * !‫ ه إ‬: 0-*-A‫ ا‬0BC‫ ا‬0<A‫ ا‬DE2‫ا‬
_=`‫ ا‬4*\]E ^I L1 ،‫ ا(س‬2 ‫ (ر‬H/2. (*YL2‫ ا‬Z</‫?ج)ا‬C‫ع ا‬W:
.‫ى‬45‫ أ‬7‫ إ‬2 9: ‫?ج‬C‫ آ_ زاد ا‬bH`. ‫د‬$A‫و‬

Potential GDP ( PGDP) is the RGDP when all country’s resources are fully employed or
used. ^‫; آ‬jE :$2k 0-*-A‫ ا‬0<A‫ ا‬DE2‫^ ه ا‬A‫ ا‬0BC‫ ا‬0<A‫ ا‬DE2‫ا‬
7-HE !‫ و‬A‫ ا‬JK‫ ه‬01 ‫م‬$=/E L*B ‫?ج‬C‫ ا‬4m2k ‫ أي‬.*<‫م آ‬$=/E ‫اارد أو‬
.‫ام‬$=‫ون ا‬$.

Business Cycle is a periodic but irregular up-and-down movements (changes) in
production and employment. The business cycle is measured by the fluctuations in
RGDP around the PGDP. 4*s ‫ات‬4*OE L*1 ^A 0‫ة ا‬4+‫ ا‬0‫ورة ا! د ه‬$‫ا‬
‫ورة ا! د‬$‫ ا‬v*-? ‫ أن‬Z*F/?‫ و‬.;*j‫?ج وا‬C‫ ا‬01 uH‫دا وه‬m ‫*د‬k‫ا‬
.^A‫ ا‬DE2‫ وا‬0-*-A‫ ا‬DE2‫ ا‬9*. ‫ارق‬+‫ت أو ا‬H<-.

Every business cycle has two phases: RGDP

PGDP
:‫ وه‬9*<'4: ‫ي‬AE ‫آ^ دورة ا د‬

RGDP
1. Expansion: Z‫ا‬
Peak
o An expansion is a significant increase
Expansion
in economic activity (an increase in RGDP)
Trough
Recession
Time
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Econ 141 Dr. Mohammed Alwosabi www.umm.biz

‫اث ا! ــد وزاد‬$‫ إذا زادت ا('ــ‬0‫<ــ‬A‫ ا‬DE‫ــ‬2‫ ا‬0‫ــ‬1 Z‫ث اــ‬$‫ــ‬A
‫?ج آ*ت‬C 4}‫م أآ‬$=/ ‫ أن ا‬02 ‫ا‬K‫ وه‬،‫ت‬:$=‫ وا‬Z</‫ ا‬9: 2B?‫إ‬
7‫ ?ـ^ إـ‬7‫ ~ـ^ اـارد 'ـ‬2:‫ا‬$=‫ اـ‬$‫ـ‬I‫ و‬FH‫^ ا‬-E ‫ث‬$A ‫ا‬K~‫ وه‬4H‫أآ‬
‫ أن‬0‫ـ‬2 ‫ي‬K‫^ اـ‬A‫ ا‬DE2< ‫و‬/: 0-*-A‫ ا‬DE2‫ ا‬L*1 H 0‫ ا‬F-2‫ا‬
‫ أن‬$‫ـ‬. ‫ـدة‬k Z‫ث اـ‬$A‫و‬.F. 9: 0?E !‫ و‬،*+. ‫م‬$=/E ‫آ^ اارد‬
‫ أن‬$‫ـ‬. 0‫ـ‬L2 Z‫ا اـ‬K‫ـ*€ وهـ‬1 €*‚ 71*1 ‫د‬/~‫ ا‬7‫^ ا! د إ‬
DE‫ـ‬2‫ ا‬9‫ـ‬: 4‫ـ‬H‫ أآ‬0-*-A‫ ا‬DE2‫ ا‬H ‫ أن‬$H1 .-‫ ا‬7‫ إ‬0-*-A‫ ا‬DE2‫^ ا‬
‫ آـ]ن ـ^ اـل و ـ‬،4‫ـ‬H‫* أآ‬+. 4m2‫م ا‬$=/? 2?‫ا أ‬K‫ ه‬02 ^A‫ا‬
. 0<m(‫ق ا „ ا‬1 *1…‫إ‬

o When RGDP > PGDP ⇒ resources

are overused.
2. Recession: ‫ط‬HL‫ا‬
o A recession is a significant decrease in economic activity (a decline in
RGDP of the country)
0<A‫ ا‬DE2‫ˆ ا‬+=2 ‫اث ا! د أو‬$'(‫^ ا‬-E :$2k ‫ط‬HL‫ث ا‬$A
9: ‫آت‬4‫<^ ا‬-1 ،‫ط‬HL‫ ا‬01 G<F‫أ ا‬$H :$2k ‫ أي‬،0-*-A‫ ا‬0BC‫ا‬
02 ‫ا‬K‫ وه‬،LE!‰ ˆ. ; ‫ أ` و‬Lk 9: ^<- L?‫ أ‬02 LB?‫إ‬
-‫ ا‬$. ‫ة‬4‚H: ‫ط‬HL‫أ ا‬$H‫ و‬،LF.‫?ج و‬C‫ ا‬4m2k ‫ام‬$=‫ ا‬9: ^<-? ‫أن‬
‫ى‬45‫رة أ‬H.‫ و‬.‫د‬/~‫'< ا‬4: 0‫ ه‬0‫> وا‬L? 7‫ ^ إ‬7' ‫ا‬4/:
! ‫ˆ ااد‬. ‫ أن‬02 ^A‫ ا‬9: 4Om‫ أ‬0-*-A‫ ا‬DE2‫ ~ن ا‬:$2k
.^‫ ا‬9k <uk 7-HE‫م و‬$=/E
o When RGDP < PGDP ⇒ some resources are underused.

Every business cycle has two turning points:

:‫ل وه‬AE 0F-? ‫ي‬AE ‫آ^ دورة ا د‬
1. A peak: -‫ا‬
‫ط‬HL‫ ا‬01 ‫أ‬$H* $/‫ و‬Z‫  ; ا‬:$2k -‫ث ا‬$AE
0-*-A‫ ا‬DE2‫ ا‬L*‫ أن ^ إ‬9~: F-? 7<k‫ أ‬L?‫ أ‬02
$BE ! >?( ZW‫ ا‬01 ‫ث ا!زدهر‬$A F-2‫ ا‬JK‫ ه‬0+1
*1 4H‫]آ‬. L:$=/2 2?( ‫ ! < و! <ارد‬F.
$BE ! >?( ،‫ى‬45‫~< أ‬: ‫ا‬K‫ =< ه‬$ 9~‫ و‬2~:

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Econ 141 Dr. Mohammed Alwosabi www.umm.biz

‫ن‬14*1 _LA ‫ا‬K‫ن ه‬W2‫^ ا‬O/*1 ،4H‫* أآ‬Y‫ا‬4‫رة ا‬$-‫ا أن ا‬K‫ ه‬02 F.
‫ا‬K~‫اء وه‬4‫ ا‬7<k ‫رة‬$-‫ه_ ا‬$2k $BE >?( ‫اء‬4. ‫<~ن‬L/‫ ا‬4/‫ا(ر و‬
.‫د‬-2‫^ * ا‬-E‫ث ا`=_ و‬$A A‫ ا‬JK‫ار ه‬4.
2. A trough: ‫د‬/~‫ا‬
Z*F/ ! F-? 7‫^ ^ ا! د إ‬m‫ط اا‬HL.
0E] ‫ي‬K‫د ا‬/~‫ ا‬7/E F-2‫ ا‬JK‫ˆ ه‬+=2 ‫ه أن‬$.
.‫ى ^ إ*> ا! د‬/: ^ ‫ أ‬0‫ وه‬،Z‫ ا‬J$.
Y
‫ أن‬H 0‫ت ا‬:<‫ˆ ا‬. s*m ‫دة‬kN. ‫م‬-? 2‫وه‬
: ./‫ر ا‬4-‫ ا‬01 ‫ه‬214k B D

Using production possibilities frontier (PPF),
the PGDP is on the curve itself where resources are
A C
fully employed. If the RGDP is equal to PGDP
the economy is producing on the PPF at points such X
B or C or any point on the PPF. DE2‫ ا‬7<k ‫ف‬4? ‫ أن‬Z*F/? _4‫ا ا‬K‫ام ه‬$=.
DE2‫ذا آن ا‬N1 ،:$=/: L<‫~ن اارد آ‬E ‘*' >/+? 72A2‫^ (?> *~ن ا‬A‫ا‬
`‫ أ‬72A2‫ ~ن ه ا‬0-*-A‫ ا‬DE2‫ أن ا‬02 ‫ا‬K‫^ ه‬A‫ ا‬DE2< ‫و‬/: 0-*-A‫ا‬
‫^ *~ن‬.-‫_ ا‬4‫ ا‬01‫ و‬B & C
. 72A2‫ ا‬7<k 0‫ط ا‬-2‫وآ^ ا‬

If RGDP < PGDP this means some resources are not
fully used (resources are unemployed or underused)
and it is represented by points inside the curve such as A 4Om‫ أ‬0-*-A‫ ا‬DE2‫إذا آن ا‬
‫ ~ن‬./‫_ ا‬4‫ ا‬9:‫< و‬F: 7-HE‫م آ<* و‬$=/E ! ‫ا أن اارد‬K‫ ه‬02 ^A‫ ا‬9:
F-? ^}: L :A .

If RGDP > PGDP this means resources are overused. This is represented by point D
outside the PPF.
.‫ى‬4H‫* آ‬+. 4m2‫م ا‬$=/? 2?‫ا أ‬K‫ ه‬02 ^A‫ ا‬9: 4H‫ أآ‬0-*-A‫وإذا آن ا‬
POPULATION SURVEY: ‫~ن‬/‫*_ ا‬/-E

The Population of a country can be divided into two groups: 7‫~ن إ‬/‫*_ ا‬/-E 22~
:9*kW:
1. Working-age population: the total number of people aged 16 years and over
who are not in jails, hospitals, or some other form of institutional care such as

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Econ 141 Dr. Mohammed Alwosabi www.umm.biz

people in full-time education. €+‫ ا‬JK‫ ه‬9… ^5$‫ ا^ و‬7‫ إ‬9*<‫د ا–ه‬$k
‫ أو أي دار‬9W/‫ ا‬01 ‫ أو‬7+/‫ ا‬01 v*‫ و‬4}‫]آ‬1 2 16 J4k ‫ آن‬9:
.‫ى‬45‫ أ‬k‫ر‬
2. Dependents. Dependents those who are too young to work or who are at
institutional care and unable to work. _‫ وه‬،^‫*ن ا‬F/ ! 9K‫ع أو ا‬HE(‫ا‬
2 16 9: ^ ‫ <^ أي أ‬+‫را آ‬H‫ا آ‬/* _L?‫ع ا(ول أي أ‬2‫وط ا‬4‚ v~k
.^‫ ا‬7<k 9‫ در‬4*s‫ي و‬45(‫ ا‬I‫اآ‬4‫*ت وا‬+/‫ن وا‬W/‫ ا‬01 _‫ ه‬9:‫و‬

The working-age population is divided into two groups: 9: ‫ع ا(ول‬2‫*_ ا‬/-E 22~‫و‬
:9*/ 7‫ ا^ إ‬7‫ إ‬9*<‫ا–ه‬
1. in the labor force <:‫ى ا‬-‫ ا‬9:
2. not in the labor force <:‫ى ا‬-‫ ا‬4*s 9:

The labor force is all people who are able and willing to work and divided into two
groups: 7‫ن أ` إ‬/-‫ا <^ و‬$/:‫ آن درا و‬9: ^‫< آ‬:‫ى ا‬-‫ ا‬01 ^5$
9*/
a. Those who are employed 9*+j‫_ ا‬/
b. Those who are unemployed but actively seeking work ^‫ ا‬9k 9*<u‫_ ا‬/
.^k 9k ‫}ن‬AH _L2~‫و‬
Labor force = employed + unemployed ‫ي‬AE <:‫ى ا‬-‫ن ا‬N1 ‫ى‬45‫ أ‬-4F.‫و‬
.^k 9k ‫}ن‬AH _L2~ ^‫ ا‬9k 9*<u‫ وا‬9*+j‫ا‬
o The employed person is the one who have a full time job or a part-time
job.*YIB ‫œ أم‬:‫ آ‬:‫ آن ^ دوا‬9: ;j‫ ا‬M=‫ا‬
o The unemployed is the person who is available for work but cannot find job,
and is actively trying to find job or waiting to be called back to a job from which
he or she has been laid off or waiting to start a new job. 9k ^u‫ ا‬M=‫ا‬
‫ول‬A‫^ و‬k 9k $B ‘AH‫œ و‬k $W _ >2~ ^< $/‫ا^ ه ا‬
‫> <> أو‬E‫د‬k‫ة إ‬41 42 ‫ي‬K‫<> ا‬k 9: ‫ف‬4m 9: ‫^ أو‬k 7<k ‫ل‬A‫ا‬
.$$B ^k 7<k >'

Not in the labor force includes any person who is in the working-age population but is
neither employed nor unemployed such as a person who is not working but is not
looking for a job, a full-time student or a retired person. ‫^ ه‬:‫ى ا‬-‫ ا‬9: v*
‫ق‬4+‫^ وا‬:‫وام آ‬$. GF‫^ آ‬k 9k ‘AH !‫; و‬j: 4*s >2~ ،^< ^‫–ه‬: M=‚
.^k 9k ‘AH ! 2' 01 >?‫^ إ! أ‬k 9k ‘AH ^u‫^ ه أن ا‬u‫ ا‬9*.‫> و‬2*.

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 Econ 141 Dr. Mohammed Alwosabi www.umm.biz

LABOR MARKET INDICATORS: ‫ات ق ا‬4‚–:

Unemployed
1- Unemployment rate = × 100
Laborforce
100 01 .‫و‬4`: <:‫ى ا‬-‫ ا‬7<k ^‫ ا‬9k 9*<u‫د ا‬$k ‫ ه‬FH‫ل ا‬$:

Example:
Suppose the working age population is 220 million, the labor force is 150 million, and the
number of employed is 135 million. What is the unemployment rate?
U= 150 – 135 = 15
UR= 15/150= 10%
Labor force
2. Labor force participation rate = × 100
Working - age population

.^< 9*<‫ع ا–ه‬W: 7<k <:‫ى ا‬-‫ ا‬9k ‫رة‬Hk <:‫ى ا‬-‫رآ ا‬: ‫ل‬$:

Exercise:
Suppose there are currently 100 people unemployed, 1500 people employed, and 2000
people in the working age population. What is the labor force participation rate?
LF = 100+ 1500= 1600
LFPR= 1600/2000*100= 80%
employed
3. Employment − to − labor ratio = × 100
Working − age population
.^‫ ا‬7‫ى ا–ه< إ‬-‫ ا‬7‫ إ‬H/2. 9*<O‫ل ا‬$:
TYPES OF UNEMPLOYMENT: FH‫أ?اع ا‬
Unemployment is classified mainly into the following types:

1. Frictional Unemployment: *‫ ا!'~آ‬FH‫ا‬

Frictional unemployment is transitional unemployment due to the short run movement of
people between jobs and the first time job seekers.

Frictional unemployment exists because of the ongoing creation and destruction of jobs
which result in people searching for jobs and firm searching for workers. There is a
friction between when you decide to get a job and when you actually find a job (i.e.,
between the old and the new job). So frictional unemployment arises when some
workers are “between jobs” or workers entering the labor market for the first time such
as new university graduates. It is temporary unemployment for a specific individual but

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 Econ 141 Dr. Mohammed Alwosabi www.umm.biz

it is permanent phenomenon in a dynamic and ongoing economy and cannot be

eliminated from the economy. ^k 9: ;j‫ل ا‬-?‫ ا‬$2k *‫ ا!'~آ‬FH‫ث ا‬$AE
><k 01 ‫أ‬$H ‫ أن‬7‫<> ا(ول إ‬k 9k >+ E 9: L*`- 0‫ة ا‬4+‫ ا‬0L1 45‰ 7‫إ‬
$. ‫œب‬F‫ ا‬¢K‫^ آ‬5$‫ و‬،GE‫ا‬4‫> ا‬HW _ ‫ أو‬،_‫ه‬+‫ء ا‬/ ><k ‫ك‬4 $-1 ،0?}‫ا‬
.FH‫ ا‬9: ‫ع‬2‫ا ا‬K‫ ه‬9… ‫ج‬4=‫ا‬

Examples:
1. A student after getting his/her degree starts looking for a job. The time between
looking for a job and getting it, the student is counted as part of the frictional
unemployment in the country.
2. A person may quit his job to search for a better offer or may be fired. He is
looking for a new job. During the time between the old and the new job this
person is counted as part of the frictional unemployment.

2. Structural Unemployment: *<~*L‫ ا‬FH‫ا‬

Structural unemployment arises due to the economy's structural and technological
change that results in a mismatch between people’s skills and the requirements of the
new job opportunities.

Structural unemployment also arises as a result of international competition that
changes the location of jobs.

Technological unemployment, which is caused when workers with less skills, talent,
or education are replaced by machines that do their jobs, is part of structural
employment. This process is often referred to as automation.

Structural unemployment usually lasts longer than frictional unemployment because
workers must retrain and possibly reallocate to find a job.

Most countries go through structural changes which result in structural unemployment
that cannot be eliminated. Structural unemployment is painful especially for old workers
who might find the best option may be to retire early or take lower skilled, low-paying
jobs. ‫م‬$k‫رات و‬L‫ ا‬01 ‫ر‬F‫ ا‬GH/. œk _‫ه‬$'‫ أ‬$-1 $2k *<~*L‫ ا‬FH‫ث ا‬$AE
. *54‫* ا‬H2B(‫اد ا ا‬4*. -<‫^ ا‬Y/‫> أو ا‬$ ‫ه‬41‫ا‬E

Examples:
1. Assembly line workers who have been replaced by robots are structurally
unemployed.

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 Econ 141 Dr. Mohammed Alwosabi www.umm.biz

2. The individual that has no required skills or training for the job is structurally
unemployed
3. Replacing paper work by automated computer system which results in the loss of
jobs for those who cannot deal with computerized systems is part of structural
unemployment.
4. Workers who lost their jobs because of re-allocation of their factories into
cheaper labor countries are structurally unemployed.

3. Cyclical Unemployment: ‫ور‬$‫ ا‬FH‫ا‬

Cyclical unemployment (also called involuntary unemployment) is the fluctuating
unemployment over the business cycle due to a fall in aggregate demand for goods and
services leading to a contraction in output across many industries. Therefore, when there
is an economic recession we expect to see a rising level of unemployment because of
plant closures and worker lay-offs. 01 ‫ات‬4*O‫ ا‬GH/. FH‫ ا‬9: ‫ع‬2‫ا ا‬K‫ث ه‬$A
F. ‫د‬B‫ا و‬K‫ ه‬02 <:‫ي ا‬$(‫ ا‬01 ‫ط‬H‫ك ه‬2‫ ~ن ه‬:$2k ‫ورة ا! د أي‬$‫ا‬
. ‫دور‬

During the recession, RGDP decrease which results in an increase in cyclical
unemployment. During the expansion, RGDP increases and cyclical unemployment
decreases. Z‫ ا‬01 :‫ور أ‬$‫ ا‬FH‫ ا‬$I1 0-*-A‫ ا‬DE2‫^ ا‬- ‫ط‬HL‫œل ا‬5 ‫أي‬
.‫ور‬$‫ ا‬FH‫^ ا‬-E 0-*-A‫ ا‬DE2‫ ا‬$I :$2k

Unlike frictional and structural unemployment, cyclical unemployment could be zero or
negative. 0?}‫ ا(ول وا‬9*k2‫ ا‬v~k 7<k

945¥‫ ا‬9*k2‫ ا‬9~ . H ‫ا أو‬4+m HE ‫ أن‬9~ ‫ور‬$‫ ا‬FH‫ن ا‬N1
.‫ا‬4+m AH ‫ أن‬9~ ! ¢K<1 L2: ZW‫ أن =< ا‬9~ ! GDP
o RGDP = PGDP, cyclical unemployment is zero.
Zero CU
o RGDP < PGDP, cyclical unemployment is positive. - CU

o RGDP > PGDP, cyclical unemployment is negative. +CU PGDP

:Jœk‫!ت ا}œث أ‬A‫ ا‬7<k ‫ف‬4? ‫ أن‬22~ ^.-‫_ ا‬4‫ ا‬7‫ إ‬42.
RGDP
‫ دور‬F. $BE ! 02 ^A‫ ا‬Z: 0-*-A‫ ا‬DE2‫وى ا‬/ :$2k -1 Time
02 ?4m2k Z*B ^O? ! 2?‫ أ‬02 ^A‫ ا‬9: 4Om‫ أ‬0-*-A‫ ا‬DE2‫ ~ن ا‬:$2k -2
‫ دور‬F. ‫د‬B‫و‬

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 Econ 141 Dr. Mohammed Alwosabi www.umm.biz

L?‫ أ‬02 ‫œ  أي‬u‫ دور إ‬F. $BE ! ‫^ أي‬A‫ ا‬9: 4H‫ أآ‬0-*-A‫ ا‬DE2‫ ~ن ا‬:$2k -3
.H

Note that negative unemployment means more than full

employment.

Example:
An autoworker that is laid off because the economy is in
a recession and then re-hired when the expansion begins
has experienced cyclical unemployment.

Full Employment: 0<~‫*; ا‬j‫ا‬

! 4:‫ أ‬FH‫ أن ا‬-*-A‫œ  وا‬u‫ إ‬F. $BE ! >?‫ أ‬2H. 4F= $ 0<~‫*; ا‬j‫ ا‬Z/? :$2k
Y‫ ودا‬45‰‫^ و‬k 9*. ^-2 9: ‫ك‬2‫ ه‬Y‫ا‬$1 ،L2? ‫ أن‬Z*F/? ! 2?N1 2‫ 'و‬L:‫> و‬2: $.
. ^ ‫ أو أ‬%5 FH‫ ا‬01 „.‫ ر‬: ^:~‫*; ا‬j‫ن ا‬N1 ‫ا‬KL‫رات و‬L‫ ا‬01 ‫دم‬-E ‫ك‬2‫ه‬

There is no unique definition of full-employment. Most economists are in agreement that
unemployment cannot fall to zero since there will always be some frictional and
structural unemployment.

Full employment instead means the lowest possible unemployment rate with the
economy growing and all factors of production being used as efficiently as possible.

There has been no percentage that has been agreed upon as the lowest unemployment
rate. However, economists believe that full employment is reached when the
unemployment rate drops below 5%.

Frictional and structural unemployment are unavoidable in an economy. There is always
some unemployment – someone looking for a job or laid off and waiting to be recalled.
So there is no zero unemployment.

Full employment occurs when there is no cyclical unemployment and the only
unemployment that exists is the frictional and /or structural. :$2k ^:~‫*; ا‬j‫ث ا‬$A

‫ دور‬F. b-1 ‫ك‬2‫~ن ه‬

The natural rate of unemployment is the unemployment rate at full employment. It
fluctuates because of the fluctuation of frictional and structural unemployment. ‫ل‬$:
b-1 *<~*L‫ ا!'~آ* وا‬FH‫ ا‬v*- : ‫** ه‬HF‫ ا‬FH‫ا‬

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Econ 141 Dr. Mohammed Alwosabi www.umm.biz

FH‫ل ا‬$: 9*.‫ور( و‬$‫ا‬،*<~*L‫ا‬،*‫ ) ا!'~آ‬FH‫ل ا‬$: 9*. ‫ق‬4+‫أي أن ا‬

‫ور‬$‫ ا‬FH‫*~<*( ه ا‬L‫** )ا!'~آ* وا‬HF‫ا‬

Over the business cycle, RGDP fluctuates around PGDP and the unemployment rate
fluctuates around the natural rate of unemployment.
1. When RGDP < PGDP that means UR > NRU
2. When RGDP > PGDP that means UR < NRU,
3. When RGDP = PGDP that means UR = NRU
‫ل‬$: ‫ا أن‬K‫ ه‬02 ^A‫ ا‬9: 4Om‫ أ‬0-*-A‫ ا‬DE2‫ ~ن ا‬:$2k -1
2‫ور ~ن ه‬$‫ ا‬FH‫** (ن ا‬HF‫ ا‬FH‫ل ا‬$: 9: 4H‫ أآ‬FH‫ا‬
FH‫ل ا‬$: $I : ‫ا‬K‫ وه‬HB:
F. $BE ! 02 ^A‫ ا‬9: 4H‫ أآ‬0-*-A‫ ا‬DE2‫ ~ن ا‬:$2k -2
FH‫ل ا‬$: * 9: 0. ^<-*1 H ‫ ~ن‬0.‫دور و‬
.**HF‫ ا‬FH‫ ا‬9: ^ ‫ أ‬H*
F. $BE ! ‫^ أي‬A‫ ا‬DE2< ‫و‬/: 0-*-A‫ ا‬DE2‫ ~ن ا‬:$2k -3
.‫ون‬/: ‫!ن‬$‫ ا‬H*1 ‫دور‬

Exercise:
Suppose the economy has unemployment rate equal to 3%. If the natural rate of
unemployment of the country is 8%.
a. What type of unemployment exists in the economy?
b. What is the size of this unemployment?

Exercise:
Fill in the following table:
Year LF NLF E U WAP LFPR UR
2001 170- 113 150 20 283 60% 11%
2002 625 175 575 50 800 78.12% 8%
2003 300 80 285 15 380 78.94% 5%

LF = labor force
NLF = not in the labor force
E = employed worker
U = unemployed
WAP = working-age population

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 Econ 141 Dr. Mohammed Alwosabi www.umm.biz

LFPR = labor force participation rate

UR = unemployment rate
: 9*?‫ا‬-‫ ا‬JK‫ ه‬9k ˆ< b-1 ‫ج‬A? ^Y/‫ ا‬JK‫^ ه‬A
Unemployed
Unemployment rate = × 100
Laborforce
Labor force
Labor force participation rate = × 100
Working - age population

employed
Employment − to − labor ratio = × 100
Working − age population
Labor force = employed + unemployed

WAP= LF + NLF

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