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Advanced Economics Week #5

Advanced Economics Week #5. Spring 2012. Advanced Economics 4/23/12 http://mrmilewski.com. OBJECTIVE: Examine the business cycle. I. Journal#14pt.A -Watch the following: - IMF's Lagarde : Global Economy Sees 'Dark Clouds on the Horizon' II. Journal#14pt.B -notes on business cycles

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Advanced Economics Week #5

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  1. Advanced Economics Week #5 Spring 2012

  2. Advanced Economics 4/23/12http://mrmilewski.com • OBJECTIVE: Examine the business cycle. • I. Journal#14pt.A -Watch the following: -IMF's Lagarde: Global Economy Sees 'Dark Clouds on the Horizon' • II. Journal#14pt.B -notes on business cycles • Notice: Parent Teacher Conference Thursday April 26th • Notice: Chapter#10&13 Test Friday April 27th • Notice: 29 Days until the Senior’s Last Day!

  3. The Business Cycle • Business cycle - the rise and fall of GDP over time. • GDP – Gross Domestic Product • GDP= C+I+G+(X-M) • C – consumer • I – business • G – government • X – exports • M - imports

  4. Phases of the Business Cycle • Ch#14 sec#1 p.376

  5. The Recession Phase of the Business Cycle • There are two phases of the business cycle • Recession – when real GDP declines for two quarters in a row (6 months) • A recession begins following a peak • Peak – the point where GDP stops going up • A recession ends at a trough • Trough – the turnaround point where GDP stops going down.

  6. The Expansion Phase of the Business Cycle • Expansion – period of recovery from a recession. • Expansion begins at the trough of the business cycle. • Expansion ends when the business cycle reaches a new peak. • Since WWII, the average recession lasted 11 months. The average expansion lasted 43 months. • The expansion that began in March 1991 & almost ended in March 2001 is the longest in history. (1st and 3rd quarters of 2001 GDP dropped)

  7. http://www.willisms.com/archives/stronggdpgrowth.gif

  8. The End of the Depression • Massive government spending during World War II added a huge stimulant to the economy for most of the early 1940s. • Recession returned in 1945, but it did not last. • As soon as the war was over, consumers went on a buying binge that stimulated expansion again. • Since 1965, there has been a recurring pattern of recessions and expansions. • After 1980, however, recessions occurred less frequently. • The expansion that began in 1991 was the longest expansion in United States history. http://2.bp.blogspot.com/_orkXxp0bhEA/SXPdlLy0TpI/AAAAAAAAPP4/YFm4rhv0rSU/s400/090118-nd-unemployment.jpg

  9. Why Business Cycles? • No one theory seems to explain past business cycles, or serves as a way to predict future ones. • Changes in capital expenditures are one cause of business cycles. • When the economy is expanding, businesses expect future sales to be high, so they invest heavily in capital goods. • After a while, businesses may decide they have expanded enough and they begin to pull back on their capital investments. http://granitegrok.com/pix/US_GDP_Growth.jpg

  10. Inventory Adjustments & Innovation • Inventory adjustments, or changes in the level of business inventories, are a second possible cause of business cycles • Some businesses cut back on inventories at the first sign of an economic slowdown and then build them back up again at the first sign of an upturn • When a business innovates, it often gains an edge on its competitors because its costs go down or its sales go up • The imitating companies must invest heavily to do this, and an investment boom follows http://images.businessweek.com/mz/07/13/0713_30busout.gif

  11. Monetary Policy • A fourth possible cause of business cycles is the credit and loan policies of the Federal Reserve System. • When “easy money” policies are in effect, interest rates are low and loans are easy to get. • Eventually the increased demand for loans causes interest rates to rise, which in turn discourages new borrowers. • As borrowing and spending slow down, the level of economic activity declines.

  12. Advanced Economics 4/24/12http://mrmilewski.com • OBJECTIVE: Examine the business cycle. • I. Journal#15pt.A -Watch the following: -Social Security Slated to Run Dry in 2033, Trustees Warn • II. Journal#15pt.B -notes on types of unemployment • Notice: Parent Teacher Conference Thursday April 26th • Notice: Chapter#10&13 Test Friday April 27th • Notice: 28 Days until the Senior’s Last Day!

  13. Frictional Unemployment • Unemployment caused by workers in between jobs for any reason. • This type of unemployment is a minor problem because these people are short term unemployed. • Examples: • New people entering the labor force • People who left their old jobs to find new jobs • P. 384

  14. Structural Unemployment • Unemployment that occurs when a job becomes obsolete or the demand for that job falls. • Serious type of unemployment • Examples: • When people stopped buying buggies and started buying cars • When employers become leaner and meaner • P.385

  15. Cyclical Unemployment • Unemployment directly related to swings in the business cycle. • Serious, but end when business cycle returns to expansion. • Examples: • Automotive industry during the last recession • Home building during the last recession • P.386

  16. Seasonal Unemployment • Unemployment resulting from changes in weather conditions on certain products • Difference between seasonal and cyclical is the period of measurement • Cyclical occurs over several quarters or years. • Seasonal takes place every year regardless of the health of the economy. • Examples: • Concrete laborers in northern U.S. cities • Farm laborers • P. 386

  17. Technological Unemployment • Unemployment caused when workers with less skill, talent, or education are replaced by machines or other equipment that does their jobs. • P.386

  18. Advanced Economics 4/25/12http://mrmilewski.com • OBJECTIVE: Examine various concepts in Microeconomics. • I. Administrative Stuff -attendance • II. Journal#16 -notes on film: -Standard Deviants-Macroeconomics • Notice: Parent Teacher Conference Tomorrow • Notice: Chapter#10&13 Test Friday April 27th • Notice: 27 Days until the Senior’s Last Day!

  19. Advanced Economics 4/26/12http://mrmilewski.com • OBJECTIVE: Review for Chapter#10&13 Test. • I. Administrative Stuff -attendance • II. Review for Chapter#10&13 Test -test over 10.4, 13.2, 13.3,&13.4: • Notice: Parent Teacher Conference Today 12:30-3PM • Notice: Chapter#10&13 Test Tomorrow April 27th • Notice: 26 Days until the Senior’s Last Day!

  20. Schedule Thursday 4/26/12 • 1st hour 7:41 – 8:15 am • 2nd hour 8:20 – 8:54 am • 3rd hour 8:59 – 9:33 am • 4th hour 9:38 – 10:12 am • 5th hour 10:17 – 10:51 am

  21. Advanced Economics 4/27/12http://mrmilewski.com • OBJECTIVE: Demonstrate mastery of Chapter#10&13. • I. Administrative Stuff -attendance • II. Chapter#10&13 Test -test over 10.4, 13.2, 13.3,&13.4: • III. Textbook Collection • Notice: 25 Days until the Senior’s Last Day!

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