Class Lecture Notes Unemployment, Inflation, and Business Cycle
Professor Shari Lyman, Ph.D.
Business Cycle
Business cycle defined the alternating periods economic expansion economic is as of and
recession.
The business cycle made expansionary (growth, inflationary, upswings, positive) is up of periods in
which:
1. b The overall price levels are increasing (inflation)
For economic growth, inflation should creeping healthy the be inflation.
2. b The unemployment levels are decreasing.
3. b The national output (GDP) is increasing.
The growth period reach its highest point (peak), then the business cycle will will enter a downturn.
The business cycle made contractionary (slowdowns, downturn, recessionary, negative) is up of
periods in which
1. b The overall price levels are decreasing (deflation)
2. b The unemployment levels are increasing.
3. b The national output (GDP) is decreasing.
The slowdown period bottom its lowest point (trough), then business cycle enter will out at the will
an upturn.
Unemployment
Unemployed defined is as:
actively seeking paid work
not currently engaged paid in work
at 16 least age
Employment working full part time a paid is or as worker.
Unemployment rate percentage the labor force that working, actively seeking is the of is not but
work.
If unemployment is increasing, it is demonstrated as a downturn on and a the business cycle shift
inward the left the aggregate demand curve. when accompanied decreasing prices to of by and
decreasing GDP. This type unemployment can resolved using traditional contractionary fiscal b of be
and/or monetary policies.
Labor Force the sum the employed and the unemployed workers the is of in economy.
Discouraged worker someone who available for paid labor, but given looking for is is has up work.
Labor Force Participation Rate the percentage the working population the labor is of age in force.
The Three Main Categories of Unemployment
Frictional Unemployment is short term unemployment arising from the process matching of
workers with jobs. This household level (microeconomic) unemployment that considered is a is
