Lectures in Macroeconomics- Charles W. Upton Unemployment and Business Cycles

Counter-Cyclical and Pro-Cyclical Indicators

Unemployment and Business Cycles Counter-Cyclical and Pro-Cyclical Indicators

Unemployment and Business Cycles A Change in Demand S SR S LR D H’H* w* w’ Here, U = U n

Unemployment and Business Cycles A Change in Demand D’ S SR S LR D H’H* w* w’

Unemployment and Business Cycles A Change in Demand D’ S SR S LR D H’H* w* w’ We know a temporary demand reduction causes a business cycle

Unemployment and Business Cycles A Change in Demand D’ S SR S LR D H’H* w* w’ We know a temporary demand reduction causes a business cycle So what does it do to unemployment?

Unemployment and Business Cycles A Modest Proposal D’ S SR S LR D H’H* w* w’ We know a temporary demand reduction causes a business cycle So what does it do to unemployment?

Unemployment and Business Cycles A Modest Proposal D’ S SR S LR D H’H* w* w’ We know a temporary demand reduction causes a business cycle So what does it do to unemployment? Ergo, U is counter cyclical

Unemployment and Business Cycles The Formal Relation GDP –Actual GDP = what you think it is –Potential GDP = GDP when U = U n

Unemployment and Business Cycles The Formal Relation GDP –Actual GDP = what you think it is –Potential GDP = GDP when U = U n Employment –Actual Employment = CLF(1-U) –Potential Employment = CLF(1-U n )

Unemployment and Business Cycles GDP and Unemployment

Unemployment and Business Cycles Potential GDP & the Natural Rate

Unemployment and Business Cycles GDP and Unemployment

Unemployment and Business Cycles The Relation

Unemployment and Business Cycles Unemployment and GDP

Unemployment and Business Cycles An Illustration GDP is $10 trillion; U n = 4%;U = 7%

Unemployment and Business Cycles An Illustration GDP is $10 trillion; U n = 4%;U = 7%

Unemployment and Business Cycles A Second Illustration GDP grew from $10 Trillion to $10.45 Trillion What will happen to U?

Unemployment and Business Cycles A Second Illustration GDP grew from $10 Trillion to $10.45 Trillion What will happen to U?

Unemployment and Business Cycles A Second Illustration GDP grew from $10 Trillion to $10.45 Trillion What will happen to U?

Unemployment and Business Cycles A Second Illustration GDP grew from $10 Trillion to $10.45 Trillion What will happen to U?

Unemployment and Business Cycles Okun’s Law

Unemployment and Business Cycles Okun’s Law

Unemployment and Business Cycles The Facts

Unemployment and Business Cycles The Facts

Unemployment and Business Cycles End ©2004 Charles W. Upton. All rights reserved Unemployment data from BLS, GDP data from Dept of Commerce