Introduction to Economic Growth and Instability
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1 on C H A P T E R Introduction to Economic Growth and Instability 8-1
2 ECONOMIC GROWTH Economic Growth on 8-2 An increase in real GDP over some time period An increase in real GDP per capita over some time period Growth as a Goal Arithmetic of Growth Rule of 70 Main Sources of Growth Increases in Resources Increases in Productivity
3 ECONOMIC GROWTH Economic Growth on Growth in the United States Improved Products and Services Added Leisure Other Impacts 8-3 Relative International Growth Rates
4 THE BUSINESS CYCLE Economic Growth on 8-4 Phases of the Business PEAK Level of business activity RECESSION TROUGH RECOVERY Time GROWTH TREND
5 THE BUSINESS CYCLE Economic Growth on Causation: A First Glance Many Causation Theories Cyclical Impact Capital Goods Consumer Durables Service Industries 8-5 Nondurable Consumer Goods
6 on UNEMPLOYMENT Measurement of, 2000 Total Population 275,400,000 Under 16 and/or institutionalized Not in labor force Employed 65,800,000 68,800, ,200,000 Labor force 140,800, Unemployed 5,600,000
7 on UNEMPLOYMENT Measurement of, 2000 rate = unemployed labor force x 100 Part-Time Employment 8-7 Discouraged Workers
8 UNEMPLOYMENT Economic Growth on Types of Frictional Structural Cyclical Full-Employment Rate of 8-8 Natural Rate of (NRU)
9 UNEMPLOYMENT Economic Growth on 8-9 Economic Costs of GDP Gap and Okun s Law The amount by which actual GDP falls short of potential GDP For every 1% unemployment exceeds the natural rate... Approximately a 2% GDP Gap occurs
10 on UNEMPLOYMENT Unequal Burdens of Occupation Age Race and Ethnicity Gender Education Duration Noneconomic Costs 8-10 International Comparisons
11 on GLOBAL PERSPECTIVE Rates in Five Industrial Nations France U.K. Germany U.S. Japan Source: Economic Report of the President
12 on 8-12 INFLATION Defined and Measurement A rising general level of prices Rate of inflation calculated using index numbers Rule of 70 Shortcut to determine doubling time Facts of
13 on 10 5 GLOBAL PERSPECTIVE Rates in Five Industrial Nations U.K. U.S. France Japan Germany Source: Economic Report of the President
14 on 8-14 INFLATION Types of DEMAND-PULL INFLATION P Price level Range 1 Range 3 Range 2 Q f Increases in Total Spending Fullemployment output Q Real domestic output & employment
15 on INFLATION Types of DEMAND-PULL INFLATION COST-PUSH INFLATION Rising Per-Unit Production Costs Supply-Side Supply Shocks 8-15 Complexities
16 on REDISTRIBUTIVE EFFECTS OF INFLATION Nominal Income Real Income Anticipations Unanticipated 8-16
17 on REDISTRIBUTIVE EFFECTS OF INFLATION Who is Hurt by? Fixed-Income Receivers Savers Creditors 8-17
18 on REDISTRIBUTIVE EFFECTS OF INFLATION Who is Unaffected or Helped by? Flexible-Income Receivers Cost of Living Adjustments (COLAs) 8-18 Debtors
19 on REDISTRIBUTIVE EFFECTS OF INFLATION Addenda Deflation Mixed Effects Arbitrariness 8-19
20 ANTICIPATED INFLATION Economic Growth on 11% = 5% + 6% Premium 8-20 Nominal Interest Rate Real Interest Rate
21 EFFECTS OF INFLATION Economic Growth on ON OUTPUT Cost-Push and Real Demand-Pull and Real Hyperinflation & 8-21 Breakdown Chapter Conclusions
22 economic growth rule of 70 productivity business cycle peak recession trough recovery labor force unemployment rate discouraged workers frictional unemployment structural unemployment cyclical unemployment full-employment rate of unemployment natural rate of unemployment (NRU) potential output GDP gap Okun s Law inflation demand-pull inflation cost-push inflation per-unit production costs nominal income real income anticipated inflation unanticipated inflation cost of living adjustments COLAs real interest rate nominal interest rate deflation hyperinflation BACK END
23 on BUILDING THE AGGREGATE EXPENDITURES MODEL 8-23 Chapter 9
Introduction to Economic Growth, Unemployment, and Inflation McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 6 1
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