Lecture 10 Economic cycle Unemployment and inflation

Lecture 10 Economic cycle. Unemployment and inflation

Lecture outline: • Economic cycle: essence, phases • Unemployment: essence, types • Inflation: essence, reasons, types

• Economic cycle is constant changing (fluctuations) in the level of the production, employment, income in a short and long terms of the economy

Economic cycle consists of the following phases • • Expansion Peak/prosperity contraction recession/Crisis

Main features of the contraction • Surplus of product • Decreasing of price • Increasing level of unemployment • Decreasing supply • Increasing of interest rate

Main features of the revival/Expansion • • • Increasing level of production Increasing investment level Increasing price Decreasing the level of unemployment Increasing income of people

Main features of the peak • • • Increasing level of production Increasing price Decreasing the level of unemployment Increasing income of people Increasing of demand for credit

Main features of recession/crisis • • • Reduction (қысқару) of production /recession Increasing of product fund (they are not sold) High level of unemployment Low salary Low level of credit interest rate

Unemployment: essence and types • Unemployment is surplus of labour supply on demand for labour • Interactions between supply of and demand for labour identify employment level

Unemployment rate • Unemployment rate(U. r. )=number unemployment people/general population x 100% • E. g U. r. = 900 000/16 000 x 100 %= 5%

Types of unemployment • Frictional • Structural • Cyclical

• Frictional unemployment means voluntary giving up the job • Structural unemployment is staying without job because of a new technology • Cyclical unemployment is staying without job because of changes in economic cycle (low demand)

Inflation: essence, types • Inflation is a process when purchasing ability of money is decreasing because of price increasing

According to price level changes inflation can be differentiated as • Steady (қалыпты) inflation • Galloping (қарқынды) inflation

Steady inflation • Is type of inflation when average price level changes till 10% per year.

Galloping inflation • Is type of inflation when price level changes between 20% and 200% per year.

Read more: • David Begg, Foundations of Economics, Mc. Graw. Hill Higher Education, 2009. • Andrew Gillespie, Foundations of Economics, OUP Oxford, 2011. • Internet resources • http: //www. oup. com/uk/orc/bin/978019958654 7/ • http: //www. investorwords. com/1641/economic _cycle. html#ixzz 2 GQLPed. ZF