Business cycle

,unemployment and
inflation

Examine:

Business cycle
Unemployment
Inflation

Definition of BUSINESS CYCLE

The fluctuations in economic activity that an economy experiences over a period of

time.
Defined in terms of periods of expansion or recession.

Facts

11 business cycle from 1945 to 2009

Average length of a cycle :69 months
Average expansion :58.4 months
Average contraction:11.1 months

The 4 Stages of the Business Cycle

Peak
Recession
Trough
Recovery

Unemployment and inflation

Two important problems in macroeconomics.

In most cases,macroeconomists can solve at least inflation or unemployment.
When economists solve one problem ,they usually worsen the other.

The Inflation/Unemployment
Tradeof

Expansionary policies stimulate a recessionary economybut cause inflation.

Contractionary policies fight inflation-but can trigger unemployment and recession.

Three Kinds of Unemployment

Frictional Unemployment

The least of the macroeconomists worries.

Arises because of movement of people between regions and jobs or through different
stages of their life cycle.

Frictional Unemployment

Reflects normal turnover in labor market

Examples:
-Students graduate and search for jobs
-Women reenter labor force after giving birth

Cyclical Unemployment

A much more serious problem.

Occurs when economy dips into recession.
Macroeconomists spend most of their time trying to solve it.

Structural Unemployment

A mismatch between available jobs and worker skills.

Structural unemployment often results when technological change makes someones
job obsolete.
Examples:
-The higly-skilled glass blower thrown out of work by the invention of bottle-making
machines
-The specialized auto worker replaced by a robot.

Inflation

Defined as a sustained increase in the general level of prices for goods and services.
It is measured as an annual percentage increase; every dollar you own buys a smaller
percentage of a good or service.

Causes of Inflation

Demand pull
Money supply

Efects of Inflation

Depreciation
Distribution of income
Shifts In spending habits
Speculation spending

Conclusions

The end of the first decade of the 21st century will be remembered as a period of rapid
recession. During this time, many people have lost their jobs and famous banks and
retail outlets have gone out of business.
Unfortunately, there is no one conclusion tounemployment.Chances are
thatcountrieswill always have a rate ofunemployment- even in prosperous times
such as after the Second World War, there was still a rate ofunemployment, although
it was very low.
In order to succed in our business career ,we need to know and understand the
meaning of this three important terms .