Copyright ©2003, South-Western College Publishing Contemporary Economics: An Applications Approach By Robert J. Carbaugh 2nd Edition Chapter 11: The Business.

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Copyright ©2003, South-Western College Publishing Contemporary Economics: An Applications Approach By Robert J. Carbaugh 2nd Edition Chapter 11: The Business Cycle, Unemployment, and Inflation

Carbaugh, Chap The business cycle Business Cycles Real GDP Recession Trough Recovery Peak Real GDP Full Cycle

Carbaugh, Chap DurationPercentage declinePeak Periodin monthsin real GDPunemployment rate Postwar recessions for the US Business Cycles %7.9% Average Source:Economic Report of the President, 1993

Carbaugh, Chap The burdens of unemployment in 2000 Unemployment Overall4.0% Gender Male4.1 Female3.9 Race White3.5 Black6.5 Age White years years and over3.0 Black years years and over6.8 Average duration of unemployment: 12.8 weeks Unemployment rates by demographic characteristics (percent) Source: Economic Report of the President, 2001; Federal Reserve Bulletin, June 2001

Carbaugh, Chap Unemployment rates around the world, 2000 Unemployment United States4.0% Canada5.7 Australia8.1 Japan4.8 France9.2 Germany8.1 Italy10.1 Sweden5.2 United Kingdom5.3 Source: US Dept. of Labor, Bureau of Labor Statistics web site Unemployment Countryrate

Carbaugh, Chap A D0D0 C S0S0 Flexible wages D1D1 Hourly wage rate ($) Rigid wages can result in involuntary unemployment Unemployment A D0D0 B S0S0 Inflexible wages D1D1 Hourly wage rate ($)

Carbaugh, Chap Impact of inflation on the real value of $10,000 Inflation Year2 percent4 percent6 percent8 percent10 percent 2000$10,000$10,000$10,000$10,000$10, $9,800$9,620$9,430$9,260$9, $9,610$9,250$8,900$8,570$8, $9,420$8,890$8,400$7,940$7, $9,240$8,550$7,920$7,350$6, $9,060$8,220$7,470$6,810$6, $8,880$7,900$7,050$6,300$5, $8,710$7,600$6,650$5,830$5, $8,530$7,310$6,270$5,400$4, $8,370$7,030$5,920$5,000$4, $8,200$6,760$5,580$4,630$3,860 Annual Inflation Rate

Carbaugh, Chap Inflation rates in selected countries, 2000 Inflation Ecuador101% Turkey51 Poland37 Venezuela16 Mexico9 Greece5 Canada3 Germany2 United Kingdom2 Japan-2 Source: International Monetary Fund, International Financial Statistics, June 2001 Inflation Countryrate

Carbaugh, Chap US Consumer Price Index Inflation YearsAverage annual inflation rate % Source: Economic Report of the President YearCPI US inflation rate as measured by the CPI, Consumer price index for selected years ( =100)

Carbaugh, Chap %3.1%2.3% * 3-month Treasury bills NominalInflationReal Yearinterest rate*rateinterest rate Nominal and real interest rates, Inflation Source:Economic Report of the President, various issues; Federal Reserve Bulletin

Carbaugh, Chap Work-time cost of products, today vs. yesterday Cost of Living Product/yearpercentProduct/yearpercent Cruise (1972)88.2Hershey bar (1900)10.1 Pizza (1958)87.7Dryer (1940)9.6 New home (1920)71.8VCR (1978)9.4 Movie (1917)65.6Chicken (1919)9.2 Auto rental (1970)62.2Microwave (1967)8.5 Suit (1927)50.6Coke (1900)7.5 Dry cleaning (1946)42.2Range (1910)6.4 Big Mac (1940)33.0Dishwasher (1913)5.6 Levi's (1897)32.2Contacts (1971)4.2 Automobile (1908)29.1Color TV (1954)4.1 Camcorder (1988)28.5Calculator (1972)2.5 Gasoline (1920)17.5Cellular phone (1984)2.0 Washer (1911)13.0Computing (1984)0.6 Source: Federal Reserve Bank of Dallas, 1997 Annual Report

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