Chapter 10

Economic Fluctuation,
Unemployment and
Inflation
 The
Business Cycle
Presented by: Jerson Zamora
 The Business Cycle
a central concern of macroeconomics is
the upswings and downswings in the level
of real output or economic fluctuations
called the business cycle.

 the fluctuations in the level of economic

activity alternating between periods of
depression and boom conditions.
The Four Phases of the
Business Cycle
Figure 10.1 illustrate a theoretical business cycle model
Each cycle is divide into four phases:
• peak or boom
• recession
• trough and
• recovery
• Two peaks – are illustrated in our hypothetical business
cycle model. Each of this peaks the economy is at, or
close to, full employment.
• Recession – is a downturn in the business cycle
during which real GDP declines, business profits
fall, and the percentage of the labor force without
jobs rises, and production capacity is underutilized
resulting to high unemployment rate.
• Trough – where the level of GDP “bottom out.
- unemployment and idle productive
capacity are at their highest levels relative to
recent years.
• Recovery – is an upturn in the business cycle
during which real GDP rises.
 Business cycle mura ra nag gugma
bisag unsaon nimo ug effort para
BOOM ka sa iyaha, mag hinay – hinay
gihapon ng RECESSION hangtod nga
ma BOTTOM OUT ka ug dili naka
kaRECOVER tungod niya..
pero ayaw ug kabalaka mo BOOM
gihapon ka pero sa lain na..
Presented by: Rolly Leron
Is the situation of actively looking for employment but not being
currently employed. The unemployment rate is a measure of
prevalence of unemployment and it is calculated as a percentage.
The unemployment rate is computed using the following
formula:

Number of Unemployment
Unemployment Rate =
Labor Force
 TYPES OF UNEMPLOYMENT
• Frictional Unemployment

• Structural Unemployment

• Cyclical Unemployment

• Seasonal Unemployment
 Frictional Unemployment
When a job opening occurs, say in a bank, and it is
a rarely filled instantaneously, even when there is
someone ready, willing, and able to fill it. In other
word, our economy has a certain degree of friction.
Thus frictional unemployment occurs when a
worker moves from a one job to another.
 Structural Unemployment

Cause by mis-match between jobs offered by

employees and potential workers. This may be
due to geographical location, skill variation,
and many other factors.
 Cyclical Unemployment

When the workers lose their jobs because of

downturns in the business cycle.
 Seasonal Unemployment

Occur when jobs are only available at a certain time

of the year.
 INFLATION

Presented by: Elmie M. Niñal

BEED IIB Student
 INFLATION
 Rise in the general level of prices of goods and
services in an economy over period of time.

 Measured by the Consumer Price Index (CPI)

INFLATION RATE FORMULA

Percent increase in
CPI
=
CPI in Current Year – CPI in Previous Year
X 100
CPI in Previous Year
PH Consumer Price Index
 INFLATION’S EFFECTS ON ECONOMY
Negative:
1. Decrease in the real value of money (or the purchasing power of
money) and other monetary items overtime;

2. Uncertainty about future inflation may decrease investment and

saving; and

3. High inflation may lead to shortages of goods if consumers begin

hoarding out concern that prices will rise in the future.
 INFLATION’S EFFECTS ON ECONOMY

Positive:

1. Mitigation of economic recessions; and

2. Debt relief by reducing the real level of debt.

 THEORIES OF INFLATION (Causes of
Inflation)
1. Demand-pull Inflation
 A rise in the general price level resulting from an excess of
aggregate demand (total spending)

 Often expressed as too much money chasing too few goods

The general price level in the economy is ‘pulled-up’ by the

pressure from buyers’ total expenditures.
 THEORIES OF INFLATION (Causes of
Inflation)

2. Cost-push Inflation
 is a rise in the general level of prices
resulting from an increase in the cost of
production
 THEORIES OF INFLATION (Causes of
Inflation)

Profit-push Inflation

 huge firm are able to protect their profit

margins by raising prices, these firms will respond
to any rise in costs by passing them to their
costumers.
PH Consumer Price Index