Chapter 10 - Economic fluctuations, unemployment, and inflation. The topics discussed in this chapter are: Examine the business cycle, consider various business cycle theories, show how economic forecasting is done, measure the GDP gap, learn how the unemployment rate is computed look at the types of unemployment, construct a consumer price index, consider the theories of inflation. | Chapter 10 Economic Fluctuations, Unemployment, and Inflation 10-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Examine the business cycle Consider various business cycle theories Show how economic forecasting is done Measure the GDP gap Learn how the unemployment rate is computed Look at the types of unemployment Construct a consumer price index Consider the theories of inflation 10-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 10-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. GDP in 1992 dollars, 1964-2000 The Conventional Three-Phase Business Cycle 10-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Business Cycle Theories Endogenous theories Innovation theory Psychological theory Inventory cycle theory Monetary theory Under-consumption theory Exogenous theories Sunspot theory War theory 10-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Business Cycle Forecasting The Ten Leading Economic Indicators 1. Average workweek of production workers in manufacturing 2. Average initial weekly claims for state unemployment insurance 3. New orders for consumer goods and materials 4. Vendors performance (companies receiving slower deliveries from suppliers) 5. New orders for capital goods 10-6 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Business Cycle Forecasting (Continued) The Ten Leading Economic Indicators 6. New building permits issued 7. Index of stock prices 8. Money supply 9. Spread between rates on 10-year Treasury bonds and Federal funds 10. Index of consumer expectations 10-7 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 10-8 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Index of Leading Indicators, 1958-2001 Note that the index has turned down well before recessions begin and turned upward before recovery set in The GDP Gap, . | Chapter 10 Economic Fluctuations, Unemployment, and Inflation 10-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Examine the business cycle Consider various business cycle theories Show how economic forecasting is done Measure the GDP gap Learn how the unemployment rate is computed Look at the types of unemployment Construct a consumer price index Consider the theories of inflation 10-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 10-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. GDP in 1992 dollars, 1964-2000 The Conventional Three-Phase Business Cycle 10-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Business Cycle Theories Endogenous theories Innovation theory Psychological theory Inventory cycle theory Monetary theory Under-consumption theory Exogenous theories Sunspot theory War theory 10-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights .
