1. Economic Instability

2. Unemployment What does it mean to be unemployed? – People available for work who made specific effort to find a job NYS definition: – Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities: Contacting: – An employer directly or having a job interview – A public or private employment agency – Friends or relatives A school or university employment center Sending out resumes or filling out applications Placing or answering advertisements Checking union or professional registers Some other means of active job search

3. Unemployment Rate Currently – May 2013: 7.6% – April 2014: 6.3% The number of unemployed individuals divided by the total number of individuals in the civilian workforce Full employment or natural unemployment – 4%

4. Inflation – A general increase in prices and fall in the purchasing value of money Price Level – The relative magnitude of prices at one point in time The inflation rate is measured using the CPI – Consumer Price Index Prices tend to rise faster during expansions and slower during recessions

5. Inflation Degrees of Inflation – Creeping inflation Inflation in the range of 1 to 3 percent per year – Galloping Inflation Inflation in the range of 100 to 300 percent per year – Hyperinflation Inflation in the range of 500 percent or more – Hungary after WWII 82,000,000,000,000,000,000,000,000,000 (82 octillion) pengos post war equaled 82 pengos pre-war

6. Causes of Inflation Prices can be “pulled up” due to excessive demand – Consumers and producers buy more than can be supplied which creates a shortage and causes prices to increase Deficit Spending – The federal government spends too much which devalues the currency

7. Causes of Inflation Rising input costs (factors of production) – A sudden rise in the costs of the factors of production (minimum wage) causes prices of manufactured goods to increase The Cycle Theory – A self-perpetuating cycle where workers ask for higher wages and prices increase

8. Causes of Inflation The final and most popular theory: – Excessive Monetary Growth Basically, the money supply grows faster than the GDP How does this happen? – The Federal Reserve System prints too much money into circulation

9. Consequences of Inflation The dollar buys less – The purchasing power of the dollar falls as the prices rise People’s spending habits can change – When prices went up in the 80s and interest rates grew, purchases of durable goods fell dramatically