Business Cycle Flashcards
Business Cycle Def + How measured
Alternating periods of economic growth. Measured with real GDP
4 stages of business cycle
1-Peak 2-Recession 3-Trough 4-Recovery
Recession Def
6 months of GDP decline
What does Economic Growth do
Raises the standard of living
What causes business cycles
Changes in total or aggregate expenditures (C, I, G, (X-M)
Why changes in expenditures cause real GDP to rise during an expansion
C: increase consumption
I: increase investment
G: increase spending
X: increase
M: decreases
Why changes in expenditures cause real GDP to decline during a recession
C: decrease consumption
I: decrease investment
G: decrease spending
X: decrease
M: increase
Unemployment rate + how calculated
% of people in the labor force without a job but looking for a job. Calculated by survey 60 000 everyone over 16 asked if employed or unemployed
Who is employed
-Works minimum 1 hour per week for pay
-Works minimum 15 hours per week unpaid for family business
Who is unemployed
Does not work but looked for a job this month
Civilian labor force def
16 or older, employed or looking for a job (-people who can’t work)
How is civilian unemployment rate calculated + Problems
Unemployment rate = Percentage of people who don’t work but are looking for a job.(Unemployed /Civilian Labor Force) X 100
Problems:
-wrong answers
-discouraged workers
-part time workers count as fully employed
-does not measure underemployment
Discouraged worker
Wants to work but gave up
3 types of unemployment
-Frictional
Temporary unemployment from moving to 1 job to another
Have marketable skills or re-entering the building
-Structural
Mismatch of jobs compared to the worker’s skills
-Cyclical
Lack of jobs during a recession
Full unemployment def
Unemployment rate equal to the sum of Frictional and Structural unemployment (no cyclical).
Any adult who does not have a job is counted as unemployed.
False. People not part of the Civilian Labor Force.
- Structural unemployment is a special type of cyclical unemployment
False. Structural unemployment is a long term situation of unemployment due to mismatch of workers with their skills. Cyclical unemployment is due to a lack of jobs because of a recession during the business cycle.
When an economy is operating at full unemployment rate
The unemployment rate will equal the natural rate
Which will most likely occur during the recessionary phase of the business cycle
Sale I decline, unemployment rate rises
