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Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition

Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition. Chapter 11: The Business Cycle, Unemployment, and Inflation. Business Cycles. The business cycle. Full Cycle. Real GDP. Peak. Peak. Real GDP. Recovery. Recession. Trough. Business Cycles.

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Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition

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  1. Contemporary Economics:An Applications ApproachBy Robert J. Carbaugh1st Edition Chapter 11: The Business Cycle, Unemployment, and Inflation

  2. Business Cycles The business cycle Full Cycle Real GDP Peak Peak Real GDP Recovery Recession Trough Carbaugh, Chap. 11

  3. Business Cycles Postwar recessions for the US Duration Percentage decline Peak Period in months in real GDP unemployment rate 1949 11 -2.0% 7.9% 1953-54 10 -3.0 6.1 1957-58 8 -3.5 7.5 1960-61 10 -1.0 7.1 1969-70 11 -1.1 6.1 1973-75 16 -4.3 9.0 1980 6 -2.4 7.8 1981-82 16 -3.4 10.8 1990-91 9 -1.2 7.1 Average 11 -2.4 7.1 Source:Economic Report of the President, 1993 Carbaugh, Chap. 11

  4. Unemployment The burdens of unemployment in 1998 Unemployment rates bydemographic characteristics (percent) Overall 4.6% Gender Male 4.4 Female 4.6 Race White 3.9 Black 7.8 Age White 16-19 years 14.1 20 years and over 3.2 Black 16-19 years 25.3 20 years and over 7.9 Average duration of unemployment: 14.5 weeks Source: Economic Report of the President, 1998 Carbaugh, Chap. 11

  5. Unemployment Unemployment rates around the world, 1998 Unemployment Country rate United States 4.2% Canada 8.4 Australia 8.1 Japan 3.8 France 11.8 Germany 7.6 Italy 12.3 Sweden 8.2 United Kingdom 6.3 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998 Carbaugh, Chap. 11

  6. Unemployment Rigid wages can result in involuntary unemployment Inflexible wages Flexible wages S0 S0 Hourly wage rate ($) Hourly wage rate ($) B A A C D0 D0 D1 D1 Carbaugh, Chap. 11

  7. Inflation Impact of inflation on the real value of $10,000 Annual Inflation Rate Year 2 percent 4 percent 6 percent 8 percent 10 percent 2000 $10,000 $10,000 $10,000 $10,000 $10,000 2001 $9,800 $9,620 $9,430 $9,260 $9,090 2002 $9,610 $9,250 $8,900 $8,570 $8,260 2003 $9,420 $8,890 $8,400 $7,940 $7,510 2004 $9,240 $8,550 $7,920 $7,350 $6,830 2005 $9,060 $8,220 $7,470 $6,810 $6,210 2006 $8,880 $7,900 $7,050 $6,300 $5,640 2007 $8,710 $7,600 $6,650 $5,830 $5,130 2008 $8,530 $7,310 $6,270 $5,400 $4,670 2009 $8,370 $7,030 $5,920 $5,000 $4,240 2010 $8,200 $6,760 $5,580 $4,630 $3,860 Carbaugh, Chap. 11

  8. Inflation US Consumer Price Index US inflation rate as measuredby the CPI, 1960-98 Consumer price index forselected years (1982-84=100) Years Average annual inflation rate 1960-64 1.3% 1965-69 3.5 1970-74 6.1 1975-79 8.1 1980-84 7.5 1985-89 3.6 1990-94 3.5 1995 2.5 1996 3.3 1997 1.7 1998 1.6 Year CPI 1990 130.7 1991 136.2 1992 140.3 1993 144.5 1994 148.2 1995 152.4 1996 156.9 1997 160.5 1998 163.0 Source: Economic Report of the President Carbaugh, Chap. 11

  9. Cost of Living Work-time cost of products, today vs. yesterday Product/year percent Product/year percent Cruise (1972) 88.2 Hershey bar (1900) 10.1 Pizza (1958) 87.7 Dryer (1940) 9.6 New home (1920) 71.8 VCR (1978) 9.4 Movie (1917) 65.6 Chicken (1919) 9.2 Auto rental (1970) 62.2 Microwave (1967) 8.5 Suit (1927) 50.6 Coke (1900) 7.5 Dry cleaning (1946) 42.2 Range (1910) 6.4 Big Mac (1940) 33.0 Dishwasher (1913) 5.6 Levi's (1897) 32.2 Contacts (1971) 4.2 Automobile (1908) 29.1 Color TV (1954) 4.1 Camcorder (1988) 28.5 Calculator (1972) 2.5 Gasoline (1920) 17.5 Cellular phone (1984) 2.0 Washer (1911) 13.0 Computing (1984) 0.6 Source: Federal Reserve Bank of Dallas, 1997 Annual Report Carbaugh, Chap. 11

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