ECO 1001 Lecture 9: CHAPTER 9 BUSINESS CYCLES,UNEMPLOYMENT AND INFLATION
22 Jan 2019
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Document Summary
Business cycle- the long run trend of the economy is one of economic growth. They are alternating rises and declines in the level of economic activity: phases of the business cycle, a peak business activity as reached a temporary maximum. The economy is near or at full employment and the level of real output is close to capacity: a recession is a period of decline in total output, income and employment. Short term stickiness is widely believed to be a major factor preventing the economy from rapidly adjusting to shocks. Prices are sticky in the short run, price changes cannot quickly equalize the quantities demanded of goods and services. Firms and consumer can postpone purchases within limits: service industries that produce nondurable consumer goods are somewhat insulated from the most severe effects of recession. Potential members of the labor force: not in labor force- adults who are potential workers but are not employed and are not seeking work.
