ECON 1BB3 Chapter Notes - Chapter 14: Human Capital, Unemployment Benefits, Equilibrium Point
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10 Sep 2017
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ECON 1BB3 Full Course Notes
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Recession- a period of declining real incomes and rising unemployment; two consecutive quarters of declining gdp (falling for 6 months); moving from a peak to a trough in stylized business curve. Depression- a severe recession: economy experiences a business cycle that is irregular and unpredictable, typically, real gdp is used to monitor short run changes, but it doesn"t matter what variable is used. When real gdp falls, so does personal income, corporate profits, consumer spending all variables fluctuate together: when gdp declines, unemployment rises, while still fluctuating around the natural unemployment rate. Classical economics *classical theory hopes to understand the real variables. Classical dichotomy: separation of variables into real variables and nominal variables. Monetary neutrality: changes in the money supply affect nominal variables, not real variables. Money and any changes to it is insignificant as the price goes up, so does our income. Matters: if someone has a job, how many g/s they can afford .