New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Econ 211 Week 6 notes

by: Nathan Williamson

Econ 211 Week 6 notes econ 211

Nathan Williamson
View Full Document for 0 Karma

View Full Document


Unlock These Notes for FREE

Enter your email below and we will instantly email you these Notes for Principles of Macroeconomics

(Limited time offer)

Unlock Notes

Already have a StudySoup account? Login here

Unlock FREE Class Notes

Enter your email below to receive Principles of Macroeconomics notes

Everyone needs better class notes. Enter your email and we will send you notes for this class for free.

Unlock FREE notes

About this Document

Cover material on business cycles and employment
Principles of Macroeconomics
Class Notes
business, cycles, employment




Popular in Principles of Macroeconomics

Popular in Department

This 4 page Class Notes was uploaded by Nathan Williamson on Tuesday October 4, 2016. The Class Notes belongs to econ 211 at University of Nebraska Lincoln taught by Walstad in Fall 2016. Since its upload, it has received 3 views.


Reviews for Econ 211 Week 6 notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 10/04/16
Econ notes 09/27/2016 Business cycles Long-run: over the long-run, there will be an upward trend in economic growth 1. Increase in the size of real GDP 2. Positive rate of economic growth Short-run: there can be fluctuations in the economy, can be within a ten-year period 1. In the short-run there can be increases and decreases in real GDP 2. You can also have positive and negative economic growth rates Business cycles have four characteristics 1. Peak-Business activity reaches a temporary maximum 2. Recession-period of decline in total output 3. Trough(bottom) output or production(GDP) reaches its lowest point 4. Expansion- output increases Recession-is a decline in total output, income and employment which last six month or longer What causes business cycles? 1. Changing expectations that create shocks a. Expectations about the future affect business decisions, but future is uncertain b. Changes in expectations will change business behavior c. Unmet expectations create shocks for businesses and the economy 2. Shocks lead to business cycles a. Irregular innovation or technological change b. Unexpected changes in productivity (training, education, capital) c. Uncertainty in political events d. Uncertainty about monetary policy (changes in money supply) e. Instability in financial institutions and markets 3. Symptoms a. Unexpected changes in total spending that lead to a demand shock b. Businesses cannot easily adjust to the change i. Fall in profits ii. Cut back production iii. Reduce employment iv. Fall in incomes Businesses have problems adjusting to demands shocks 1. In the short-run, businesses handle shocks with either a. Price changes b. Quantity changes 2. But prices are sticky 3. And quantity changes lead to problems for the economy 4. Demand shock example #1 cars a. Demand curve is down sloping b. Supply curve is vertical c. Quantity is fixed 5. Demand shock with flexible prices a. Only price changes i. Profits for firm rise or fall b. Quantity or output is fixed i. So employment of workers is the same Demand shock: Example #2 1. Demand is down sloping 2. Supply curve is horizontal 3. Price is fixed (37,000) 4. Quantity is flexible Demand shocks with fixed price 1. Only quantity changes 2. But production is inefficient if it goes too high or low Inventories 1. Output that is produce but not yet sold 2. Fix output is optimal level 3. Use inventories to adjust for low or high demand Inventories: 1. if low demand, increase inventories Short-run and long-run 1. In short-run, inventories help firms adjust to demand shocks 2. In long-run, inventory changes do not work a. Profits fall b. Output is cut c. Employment is reduced Sticky prices 1. In short-run, pries in the economy are mostly fixed or sticky because a. Consumers prefer stable prices b. Firms want to avoid price wars 2. If demand falls, firms cannot lower prices to increase quantity sold a. Cut back production b. Decrease employment 3. Cause short-run changes for firms and the economy Effects on Different industries 1. Durable goods-more effect a. Less consumer spending on durable goods (e.g. cars) b. Less business investment 2. Nondurables-less effect a. Spending holds up better (e.g. food, clothing) 3. Services-less effect on basic services Conclusion 1. Unexpected changes in demand can affect a. Output b. Employment of workers 2. Cause short-run changes for firms and the economy Unemployment 1. Measuring unemployment-take the total population and split it into segments. Only count the labor force and exclude the segments that consist of those under 16 and/or institutionalized, as well as not in labor force (retirees and those who just aren’t working) 2. Unemployment rate= Unemployed/labor forcex100 How BLS measures employment status 1. Sample survey of 60,000 representative households 2. Ask a series of questions a. Did you work one or more hours for pay this week b. No. go to 2. 3. Are you temporarily absent or laid off from work? a. Yes. You’re employed b. No go to 3 4. Have you searched for work in the past four weeks? a. Yes. You’re unemployed b. No you’re not in the labor force Problems 1. Underestimate unemployment 2. Why? a. Involuntary part-time workers b. “Discouraged” workers who are no longer looking for work i. Which leads to a declining participation rate in the labor force Alternative measure 1. Start with number unemployed 2. Add all persons marginally attached to labor force a. Those who want to work and are available, but quit looking b. Those employed part-time for economic reasons 3. In august 2016 it was 9.7 Types of unemployment 1. Frictional- search and wait for new job 2. Structural- change in composition of work force- in sectors 3. Cyclical – downturn in the business cycle- caused by a recession Full employment 1. Less than 100% employment 2. Full-employment unemployment rate= frictional + structural unemployment 3. Also called the Natural rate of unemployment 4. Cyclical unemployment is not part of the natural rate Natural rate of unemployment 1. Real output at this level is economy’s potential output 2. Currently it is about 5% Okun’s Law- for every 1% the unemployment rate differs from its natural rate, a 2% gap is generated between potential and actual GDP Example/ Unemployment Rate=6% Natural unemployment rate= 5.0% Difference= 1.0% Real GDP Gap 1. If so, U.E rate= natural U.E. rate a. Actual GDP= potential GDP 2. If U.E. rate> natural U.E., rate a. Actual GDP<potential GDP Noneconomic Cost 1. Career effects a. Loss of skills and opportunities b. Health effects c. Family effects d. Social Effects e. Political Effects


Buy Material

Are you sure you want to buy this material for

0 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Kyle Maynard Purdue

"When you're taking detailed notes and trying to help everyone else out in the class, it really helps you learn and understand the I made $280 on my first study guide!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.