Bài giảng MicroEconomics - Chapter 026 Business Cycles, Unemployment, and Inflation

Business Cycles, Unemployment, and InflationChapter 26McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter ObjectivesThe business cycle and its phasesMeasuring unemployment and inflation The types and impacts of unemployment and inflationThe Business CycleLevel of Real OutputTimePeakPeakPeakRecessionRecessionExpansionExpansionTroughTroughGrowthTrendDurable and nondurable industries affected differentlyCauses of Business CyclesShocks and price stickinessSupply and productivity shocksMonetary shocksFinancial bursts and bubblesUnexpected political eventsCommon linkUnexpected changes in spendingUnemploymentTwin problems of the business cycleUnemploymentInflationMeasurement of unemploymentWho’s in the labor forceProblems with the unemployment ratePart-time employmentDiscouraged workersUnemployment RateUnemployedLabor Force=x100UnemploymentUnder 16And/orInstitutionalized(71.8 Million)2007 dataTotalPopulation(303.6 Million)Not inLabor Force(78.7 Million)Employed(146.0 Million)LaborForce(153.1 Million)Unemployed(7.1 Million)Source: Bureau of Labor StatisticsUnemploymentTypes of unemploymentFrictional Structural Cyclical Full employment definedNo cyclical unemploymentNatural rate of unemploymentFull employment rate UnemploymentNatural rate of unemployment1980’s 6%Today 4-5%Aging labor forceTemp agencies and the internetNew welfare laws and work requirementsPrison population has doubledCost of UnemploymentForegone outputPotential outputGDP gap (Actual output – potential output)Okun’s LawEach 1% above NRU creates negative 2% output gapUnemployment 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005The GDP Gap12,00011,00010,0009,0008,0007,0006,0005,000GDP (billions of 1996 dollars) 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005The Unemployment Rate1086420Unemployment(percent of civilianLabor force)Source: Congressional Budget Office & Bureau of Economic AnalysisGDP gap(positive)GDP gap(negative)Potential GDPActual GDPUnemploymentUnequal burdensOccupationAgeRace and ethnicityGenderEducationDurationNoneconomic costsUnemploymentSource: Bureau of Labor StatisticsUnemployment Rates in Five Industrial Nations,1995-2005InflationRise in general level of pricesConsumer price index (CPI)Market basket 300 goods and servicesTypical urban consumer2 year updatesCPIPrice of the Most Recent MarketBasket in the Particular YearPrice estimate of the MarketBasket in 1982-1984=x100InflationAnnual Inflation Rates in the United States,1960-2007Inflation Rate (percent)Source: Bureau of Labor StatisticsInflationSource: Bureau of Labor StatisticsInflation Rates in Five Industrial Nations,1995-2005InflationTypes of InflationDemand pull Cost-push Redistributive EffectsNominal and real incomeGrowth in nominal income vs. inflation rateAnticipated vs. unanticipated inflationInflationWho is hurt by inflation?Fixed-income receiversSaversCreditorsWho is unaffected or not hurt by inflation?Flexible-income receiversCost-of-living adjustments (COLAs)DebtorsAnticipated InflationNominal Interest Rate Real Interest RateInflation PremiumNominalInterestRateRealInterestRateInflationPremium11%5%6%=+Other Inflation IssuesDeflationMixed effectsArbitrarinessCost-push inflation and real outputDemand-pull inflation and real outputHyperinflationThe Stock MarketStock prices and macro instabilityThe market for stocksVolatile stock pricesWealth effectInvestment effectLittle impact on macroeconomyStock market bubbles do have an impactIndex of Leading IndicatorsKey Termsbusiness cyclepeakrecessiontroughexpansionlabor forceunemployment ratediscouraged workersfrictional unemploymentstructural unemploymentcyclical unemploymentfull-employment rate of unemploymentnatural rate of unemployment (NRU)potential outputGDP gapOkun’s lawinflationConsumer Price Index (CPI)demand-pull inflationcost-push inflationper-unit production costsnominal incomereal incomeanticipated inflationunanticipated inflationcost-of-living adjustments (COLAs) real interest ratenominal interest ratedeflationhyperinflationNext Chapter PreviewBasicMacroeconomicRelationships