Understanding Unemployment and Inflation

These flashcards cover key concepts related to unemployment types, GDP graphs, inflation types, and economic indicators as presented in the lecture.

Cyclical unemployment

Unemployment caused by recession.

Seasonal unemployment

Unemployment caused by the changing of seasons (e.g., pool workers and landscapers).

Structural unemployment

Unemployment caused by advances in technology (e.g., ATMs and self-checkout systems).

Frictional unemployment

Temporary unemployment due to a lack of information.

Peak (in GDP graphs)

The highest point on the graph where GDP is high, inflation is high, and unemployment is low.

Recession

A decline in the graph where GDP lowers, inflation lowers, and unemployment rises.

Trough

The lowest point on the graph where GDP is very low, inflation is low, and unemployment is high.

Recovery

The rise on the graph where GDP begins to rise, inflation rises, and unemployment lowers.

Expansion

When a new peak is reached in the graph where GDP is high, inflation is high, and unemployment is low.

Cost-push inflation

When the price of manufacturing a good increases, causing the final goods price to increase as a result.

Demand-pull inflation

When demand increases and the price of the final good increases as a result.

Range 1 (inflation)

No inflation, output (quantity) and employment rise.

Range 2 (inflation)

Inflation occurring, prices, output (quantity), and employment rise.

Range 3 (hyperinflation)

Prices rise, output and employment stay consistent.

Indicators of recession

Stock prices, profit margins, corporate profits, housing starts, building permits.

Full employment/unemployment rate

The rate of unemployment where there is no cyclical unemployment, typically between 4-5%.

Okun's law

For every 1% that the actual unemployment rate exceeds the natural rate, a 2% GDP gap is created.

Inflation

Average prices rise.

Deflation

Average prices fall.

Stagflation

High unemployment and inflation rates occurring simultaneously.

Hyperinflation

Prices rise very quickly.