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1、Economic Fluctuations, Unemployment, and Inflation,Chapter 8,1. Swings in the Economic Pendulum,A Hypothetical Business Cycle,The phases of the business cycle are:,Expansion, Peak (or boom), Contraction, and, Recessionary trough. The duration of business cycles is irregular and the magnitude of the
2、swings in economic activity varies.,The Business Cycle,In the past, ups and downs have often characterized aggregate business activity.,Despite these fluctuations, there has been an upward trend in real GDP in the United States and other industrial nations.,2. Economic Fluctuations and the Labor Mar
3、ket,Economic Fluctuations and the Labor Market,The noninstitutional civilian adult population is grouped into two broad categories:,Persons not in the labor force, and, persons in the labor force.,In order to be classified as unemployed, one must either be on layoff or actively seeking work.,U.S. Po
4、pulation, Employment, and Unemployment: 1998,67.1%,64.1%,4.5%,1998,1975,1948,1960,1998,1975,1948,1960,U.S. Labor Force Participation of Men and Women: 1998,As the chart illustrates, the labor force participation rate for women has been steadily increasing for several decades.,The rate for men has be
5、en declining during the same period.,Composition of the Unemployed by Reason,There are various reasons why persons were unemployed in 1998.,Only one third (31.5 %) of the unemployed were terminated from their previous jobs.,More than two fifths (42.7 %) of the unemployed were either new entrants or
6、reentrants into the labor force.,Source: Monthly Labor Review, April 1999.,3. Three Types of Unemployment,Three Types of Unemployment,Frictional Unemployment:,Caused by imperfect information in a world of dynamic change. Occurs because: employers are not fully aware of all available workers and thei
7、r job qualifications, and, available workers are not fully aware of the jobs being offered by employers. Structural Unemployment: Reflects an imperfect match-up of employee skills and the skill requirements of the available jobs. Also reflects structural and demographic characteristics of the labor
8、market. Cyclical Unemployment: Reflects business cycle conditions When there is a general downturn in business activity, cyclical unemployment increases.,4. Employment Fluctuations - The Historical Record,Unemployment and Output Are Closely Linked Over the Business Cycle,As expected, unemployment ro
9、se rapidly during each of the six recessions (the shaded years indicate periods of recession).,Here we illustrate the rate of unemployment during the 1960-1998 period.,In contrast, soon after each recession ended, the unemployment rate began to decline as the economy moved into an expansionary phase
10、 of the business cycle. Note that the actual rate of unemployment was greater than the natural rate during and immediately following the recession.,The Concept of Full Employment,Full Employment: The level of employment that results when the rate of unemployment is normal, considering both frictiona
11、l and structural factors.,The concept of full employment is closely related to concept of the natural rate of unemployment. Natural Rate of Unemployment: The level of unemployment that reflects “job shopping” in an economy filled with imperfect information and dynamic change.,The natural rate of une
12、mployment is neither a temporary high nor a temporary low; it is a rate that is both achievable and sustainable into the future. It is the rate of unemployment accompanying the economys “maximum sustainable rate of output.”,The natural rate of unemployment is influenced by both demographic factors (
13、e. g. youthful workers as a share of the labor force) and public policy (e. g. generous unemployment benefits). The actual rate rises above the natural rate during a recession and falls below the natural rate during an economic boom.,The Concept of Full Employment,5. Unemployment and Measurement Pro
14、blems,Unemployment and Measurement Problems,The definition of unemployed involves some subjectivity.,Some economists argue that the employment/population ratio - the number employed divided by population 16 years old and over - is a better indicator of job availability than the unemployment rate.,1.
15、 Classify each of the following as employed, unemployed, or not in the labor force:,Questions for Thought:,a. Brown is not working; she applied for a job at Wal-Mart last week and is awaiting the result of her application. b. Smith is vacationing in Florida during a layoff at a GM plant due to a mod
16、el changeover, but he expects to be recalled in a couple of weeks.,c. Green was laid off as a carpenter when a construction project is completed. He is looking for work but has not found anything except an $8 per hr job, which he turned down. d. West works 50 to 60 hours per week as a homemaker for her family of nine.,e. Carson, a 17-year-old, works six hours per week as a route person for the l
