Econ 14 Files
Econ 14 Lecture
Notes
Lecture 13: Unemployment and Inflation
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Economics 14 |
Lecture 13: Unemployment and Inflation
business cycles
measuring unemployment
inflation
Business Cycles
The American economy experienced increasing material wealth and productivity over the century.
However, the growth of output has not been smooth: periods of rising output are followed by periods of falling output. These fluctuations in economic activity are called business cycles.
A recession is a decline in total output, income, employment, and trade usually lasting 6 months to a year, and marked by widespread contractions in many sectors of the economy.
Measuring Unemployment
| The labor force consists of those people with jobs and those people looking for work. The labor force participation rate measures the fraction of the civilian, noninstitutionalized population of those 16 years of age or older who are in the labor force. |  |
| A person is unemployed if they are looking for a job but unable to find one. The unemployment rate is calculated by dividing the number of unemployed people by the size of the labor force. |  |
Click here to see the most recent employment numbers from the Bureau of Labor Statistics
The official unemployment rate may overstate or understate the true amount of unemployment:
- overstate
- no check on those who say they are unemployed
- understate
- part-time workers who cannot find a full-time job are, nonetheless, counted as fully employed
- discouraged workers who have given up looking for a job are not counted as unemployed
Inflation
| The consumer price index (CPI) tracks changes in the prices paid by consumers for a representative or market basket of goods and services. The CPI attempts to measure the "cost of living". The cost of the market basket of goods and services is set equal to 100 in the base year. The CPI for any year is equal to 100 +/- the percent change in the cost of the market basket since the base year. If the CPI equals 150, the cost of living has risen 50 percent since the base year; the cost of living has risen 80 percent since the base year if the consumer price index equals 180. The Bureau of Labor Statistics has a page of frequently asked questions about the CPI. |  |
| The inflation rate is the percentage change in the consumer price index. |  |
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David A. Latzko Business and Economics Division Pennsylvania State University, York Campus office: 13 Main Classroom Building phone: (717) 771-4115 fax: (717) 771-4062 e-mail: web: www.yk.psu.edu/~dxl31 |
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