Business Cycle- Short term fluxuations experienced in the economy due to changes in the level of economy.- Four phaseso Peak -> maximum economic activityo Recession -> decline in real output for at least two quarters o Trough -> lowest point of economic activity o Expansion -> times for recovery. Real output levels for an economy as a fullLabor force - Years 16 and up to be considered in the labor force. They need to be, or actively, looking for a job. o Does not include individuals who are under 16 or institutionalized. And doesn’t include someone without a job for a week. o Full time or part time position in the economy are considered in the work force. o Unemployed -> no job for at least a week but actively search for the past 4 weeksUnemployment - Three types of unemploymento Frictional -> searching and waitingo Structural -> skills mismatcho Cyclical -> recession and business cycle - Discouraged worker -> not searching for a job Unemployment rate - The rate tells us the percentage of workers in the labor force who are unemployed and it’s a good indicator of the economy.o Unemployment rate = unemployed / labor force (employed + unemployed) x 100o To calculate the unemployed, subtract labor force from employed The natural rate- A fully employed economy is one that is operating at what economists call the natural rate of unemployment o Natural rate = Frictional unemployment rate + structural unemployment rate o If not given rates, divide natural rate by labor force and multiply by
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