ECON 2000 Lecture Notes - Lecture 9: Stagflation, Aggregate Supply, Classical Dichotomy
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Document Summary
Fluctuations in the economy"s output are closely associated with fluctuations in employment. Periods of falling output and rising unemployment -> recession: more workers have part-time jobs and fewer workers work overtime. Economists call these fluctuations in output & employment the business cycle. Long-run growth in gdp is determined primarily by technological progress: not associated w/ any long-term trend in the rate of unemployment. Short-run movement in gdp is highly correlated with the utilization of the labour force. Government economists are interested in forecasting for two reasons: the economic environment affects the gov. (i. e how much tax revenue collected, the gov. can affect the economy through its choices of monetary & fiscal policy. Leading indicators: variables that tend to fluctuate in advance of the overall economy (i. e. new orders, inventory levels, # business permits issued, stock market indexes, money supply data, spread btw short- and long-term interest rates & consumer confidence surveys)