Business Cycle

RGDP

Changes in real GDP represent changes in the total production of final goods and services in an economy in one year.
When real GDP increases, more final goods and services are being produced in an economy, and create income for people, as well as additional jobs.
Problems with using RGDP as an indicator of economic health include not tracking income relative to population, environmental damage.
over time, GDP increases and decreases, which is called the business cycle

There are points where real GDP hits a maximum, a peak. The periods before peaks are when the economy is expanding.

And, there are points where real GDP hits a minimum a trough. The periods before troughs are when the economy is contracting.
If real GDP contracts for two or more consecutive quarters — meaning six months or more — the economy is in a recession.
RGDP has been increasing for the past 60 years at a rate of 3% average.
During expansions, businesses typically invest more, leading to job creation and higher consumer spending.
Conversely, during contractions, businesses may reduce investments, leading to layoffs and decreased consumer confidence.

Some economic variables tend to change before real GDP changes. For example, a drop in the stock market often occurs before a decrease in real GDP. The U.S. government keeps track of these variables because they often signal later changes in real GDP.
This data is collected and turned into the index of leading indicators, which indicates the future economy.
Unemployment is closely related to changes in RGDP
As unemployment rises, it typically reflects a contraction in economic activity, suggesting that businesses are scaling back on hiring or laying off workers in response to declining demand.
The unemployment rate are those who are currently looking for work and who are unemployed.

Structural unemployment: this type occurs when there is a mismatch between the skills of the workforce and the needs of employers, often due to technological changes or shifts in the economy.
Cyclical unemployment: this type arises during periods of economic downturns, where overall demand for goods and services decreases, leading to layoffs and a higher number of job seekers, as it is typically influenced by the business cycle. .
frictional unemployment: this type refers to the short-term unemployment that occurs when individuals are between jobs or are entering the workforce for the first time, as they take time to find a position that best matches their skills and preferences.
seasonal unemployment: this type occurs at specific times of the year when demand for certain jobs decreases, often affecting industries like agriculture, tourism, and retail, where employment fluctuates with the seasons.

Full employment is the level of employment or unemployment at which the economy is said to be fully employed. (Not 100% employed)
In an economy, some level of unemployment will always result from the structure of the economy: structural unemployment, frictional, seasonal and cyclical. There will always be people who lack the appropriate job skills. frictional and structural unemployment are fairly steady, and seasonal is adjusted for, changes in unemployment rate shows changes in cyclical unemployment rate.
The economy is said to be at full employment when the cyclical unemployment rate is zero.
while the unemployment rate can't be negative, cyclical unemployment can be. If frictionally or structurally unemployed workers are hired, then the cyclical unemployment rate is negative.

From a macroeconomic point of view, unemployment means that the factors of production in the economy aren't being fully utilized. The production of the economy could be increased if more people were hired. And greater levels of production mean greater levels of income and expenditure, leading to greater economic well-being.
This discrepancy is called the GDP gap: the difference between the potential output of an economy and its actual output, highlighting the lost economic activity due to unemployment.
Discourage workers may also contribute negatively to society by causing family problems, crime, illness, and drug and alcohol abuse. And costs tax-payers to aid them