Chapter9 Flashcards
Irregular Innovation
Significant new products or production methods, such as those associated with the railroad, automobile, computer, and internet, can rapidly spread through the economy, sparking sizable increases in investment, consumption, output, and employment. After the economy has largely absorbed the new innovation, the economy may for a time slow down or possibly decline. Because such innovations occur irregularly and unexpectedly, they may contribute to the variability of economic activity.
Productivity changes
When Productivity- Output per unit of input- Unexpectedly increases, the economy booms. When it unexpectedly decreases, the economy recedes. (can be caused from changes in resource availability or unexpected changes in the general rate of technological advance.)
Monetary Factors
Some economists see business cycles as purely monetary phenomena. When a nation’s central bank shocks the economy by creating more money than people were expecting, and inflationary boom in output occurs. By contrast, printing less money than people were expecting triggers an output decline and, eventually, a price-level fall.
Political events
Unexpected political events, such as peace treaties, new wars, or the 9/11 terrorist attacks, can create economic opportunities or strains. In adjusting to these shocks, the economy may experience upswings or downswings.
Financial Instability
Unexpected financial bubbles (Rapid asset price increases) or bursts (abrupt asset price decreases) can spill over to the general economy by expanding or contracting lending, and boosting or eroding the confidence of consumers and businesses. Booms and busts in the rest of the economy may follow.
Cyclical Impact of Durable Goods
These are goods that can be postponed being bought. Things such as a nicer car or a house or farm equipment
Cyclical Impact of Non-Durable Goods
These are goods that are insulated with impact because they are things that people really need such as medical or legal services. They will decline but not as much as the Durable Goods
Calculating the Unemployment Rate
Unemployment Rate = Unemployed/Labor Force X 100
What are the 3 groups in the total population?
Under 16= considered potential members of the labor force.
Not in the Labor Force= Those that are not seeking work
Labor Force=People who are able and willing to work. (employed and those that are seeking actively)
