3. The inflation rate is the percentage
change in the price level.
The Phillips Curve shows the
relationship between the inflation rate
and the unemployment rate.
4. Upward and downward
movements
Measured by
considering the growth
rate of real gross
domestic product
Expansion and
contraction in a business
cycle are self-reinforcing
and cumulative in effect
Wake like movement in
economic activity
Economy-wide
fluctuations in
production or economic
activity over sveral
months or years
5. Peek /Boom
Could be situation where
the number jobs more
than the number of
workers- lead to increase
in wages,price,interest
and profit
Economy full
employment
A prosperity period
More investment from
business optimism
Economy experience a
high level of output
and trade,higher
employment levels and
income
6. Recession
Decline in consumption
expenditure and
investment level
A reduction in aggregate
income in terms of wage
and profit
A decrease in yhe
volume of output,trade
and transactions
An increase in the level
of unemployment
7. Trough
Minimum point
recession ends(real
GDP stops falling)
Will last until there
is an increase in real
GDP
Period of great
suffering and
hardship facing by
society
Unemployment
rates will be higher
and will create
many problems
The overall
economic activity
will fall to the
lowest level
The worst phase pf
business cycle
8. Definition
unemployment
Unemployment
rate
Full
employment
• A situation where labour force participants
are available and willing to work but are
unable to find jobs.
• A percentage of the labour force who are
unemployment and are actively seeking jobs
• UR (%) = Number of unemployment/Labour
force X 100%
• The situation in the economy where al
available resources are employed to
produce goods and service
9. Frictional
unemployment
Cyclical
unemployment
Structural
unemployment
Seasonal
unemployment
• Occurs when people are in between jobs,entering and reentering the labour force
• Ex : peolple quit their jobs for a better positions or higher wages or when fresh
graduates are actively seeking for a job
• Occurs when there is a lack of jobs because of a downswing in a business cycle or a
recession
• Companies close down and the workers are laid off
• Arises due to structural changes in the economy of a country
• Respon quickly meet changing demands,technological or comprtition
• Arises due to seasonal variation in the activities of particular industries
• Caused by climatic changes,fashion or inherent nature
10. Effect of unemployment
Effect on the economy
Effect on individuals and
society
Loss in government revenue
obtain from personal taxes
Loss of income and self
respect
Reduce development
activities of the economy
Loss of job skills
Lead to slow economic
growth and low output
Socials and political
problems
11. Monetary policy
Fiscal policy
Direct control measures
Open market operation – Purchase
of securities or short term bonds
Decrease in taxes
Providing training and technical
education
Lowering the reserves requirement
Increase in government
expenditure
Development of new land
Lowering the discount rate
Lowering the interest rate
Job creation in varios sectors in an
economy
12. Definition
Measure
inflation
• A continuous increase in the general price
level of goods and services in the economy
• Deflection- a decrease in the general price
level of goods and services in the economy
• Stagflation- when an economy experiences
high unemployment and rapid inflation
simultaneously
• Inflation rate= CPI this year – CPI previous
year/CPI previous years X 100
• CPI (index that measure changes inn the
average price of consumer goods and
services
• Disinflation a reduction in the rate of
inflation
13. Demandpull
inflation
Costpush
inflation
• When aggregate demand cannot meet the
aggregate supply
• Increase in the general price level associated
with an increase in the cost of production
• Factors
• 1)Wage-push inflation
• 2)Profit-push inflation
• 3)Import –push inflation
15. Monetary
policy
Fiscal policy
Direct control
and rationing
Open market
operation-selling
of securities or
short term bonds
Increase in taxes
Price control and
rationing
Raising the
reserve
requirement
Decrease in
government
spending
Anti-hoarding
campaign
Raising the
discount rate
Raising the
interest rate
Selective credit
control policy
Compulsory
savings
16. Demand-pull inflation is inflation initiated by
an increase in aggregate demand.
• Cost-push, or supply-side, inflation is
inflation caused by an increase in costs.
17. Increase in AD can
be due to a fiscal or
monetary policy,
thus increasing
prices
18. Upward shift of the
AS will be due to
increase in costs due
to increase in price of
inputs.
19.
Stagflation occurs when output is falling at
the same time that prices are rising.
One possible cause of stagflation is an
increase in costs.
20.
21. Civilian
Noninstitutional Adult Population
All civilians 16 years of age and older
Excludes institutionalized in prisons or mental hospitals
Excludes those in military
Labor force
Those in the adult population who are either working
or looking for work
21
22. Unemployed
Those with no job who are looking for work
Unemployment
rate
Measures the percentage of those in the labor force
who are unemployed
Equals the number unemployed divided by the
number in the labor force
Does not include discouraged workers
Discouraged
workers
Those who are no longer looking for work but are
unemployed
22
23. Decline
in the unemployment rate over last 20
years
Overall growth in the economy
Relatively fewer teenagers in the work force
Unemployment
rate says nothing about who is
unemployed or for how long – differs across
Race
Gender
Age
Geographical area
Occupational group
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