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).
