1. What are the effects of persistent inflation?
2. Why can't everyone find a job?
3. How much of growth in GDP is really inflation?
4. Are all business cycles alike?
5. Why do budget and balance of payments deficits keep growing in many countries?
1. Define inflation and explain its effects
2. Define unemployment and explain its costs
3. Distinguish among various types of unemployment
4. Define Gross Domestic Product
5. Distinguish between real GDP and nominal GDP
6. Appreciate the importance of increases and fluctuations in real GDP
7. Define the Business Cycle
8. Understand how employment, output and prices fluctuate over the business cycle
9. Define the government's budget deficit and the nation's international deficit.
1. Inflation
2. Unemployment
3. Gross Domestic Product
4. Business Cycles
5. Government Deficits
6. International Deficits
A. The fear of inflation has serious economic costs.
1. It prevents governments from expanding production and reducing unemployment.
2. It may lead governments to overvalue their exchange rates in order to:
a. keep the prices of imported goods (Z) low.
b. Will damage export industries and employment
A. Inflation is a prolonged upward movement in the average level of prices (P).
Deflation is a prolonged downward movement in the average level of prices (P).
1. The average level of prices (P):
2. A price index measures the average level of prices as a percentage of their average level in an earlier, base period.
B. the inflation rate (INFRTE) is the percentage change (the growth rate) in the price level.
1. Inflation rate = [(Current year's price level) - (Last year's price level) / (Last year's price level] * 100
2. U.S. had an episode of rapid inflation in the 1970s.
3. Vietnam
a. experienced rapid inflation in 1980's up to 1989.
i. Retail price index (% change from previous year
a. experienced much lower inflation after 1989.
i. Retail price index (% change from previous year) (INFRTE)
Source: WB p. 248
C. The real value of money is the amount of goods and services that can be bought with a given amount of money.
1. Inflation lowers the value of money by boosting the prices of goods and services.
2. When inflation rates differ between countries, their foreign exchange rates change.
a. The foreign exchange rate is the rate at which one country's money can be used to purchase another country's money.
D. The rate which people believe that the price level is rising is called the expected inflation rate. (EXINFRTE)
1. Expected inflation rate (EXINFRTE) is very important in making long term contracts.
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A. There are two major types of inflation
1. Demand-pull and
2. Cost-push
B. Demand pull
1. Origin is increase in demand in many markets (shift of D curves to the right)
a. May be result of increase in money supply
2. Characterized by shortages
3. Quantity increases on Demand pull inflation
C. Cost push
1. Origin is increase in a producer-set price (shift of Supply curves upward)
a. e.g. OPEC raising oil prices
b. Unions raising wages in bargain
c. Government raising minimum wage
2. There may be producer-created shortages
3. Quantity declines in cost-push inflation
D. Most real world inflations have elements of both demand ----pull and cost-push.
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(B 28-5)
A. The cost of inflation will depend on whether the inflation was anticipated (expected) or not.
1. Anticipated (expected) inflation is one that has been correctly forecast by most people.
2. Unanticipated (Unexpected) inflation is that part of the inflation rate (INFRTE) that people did not expect.
B. Unanticipated inflation has two major costs.
1. it alters the distribution of income between borrowers and lenders.
a. Unanticipated inflation creates unanticipated changes in the value of money.
b. An unanticipated increase in the inflation rate (INFRTE)
i. benefits borrowers and harms lenders because loans are repaid with money which is unexpectedly lower in value.
(e.g. US banks in the 1970s)
c. An unanticipated decrease in the inflation rate will harm borrowers and benefit lenders.
i. (e.g. LDCs in 1980s repaying loans to US banks)
2. It alters the distribution of income between workers and firms (or enterprises).
a. An unanticipated increase in the inflation rate:
b. An unanticipated decrease in the inflation rate:
3. Unexpected inflation benefits governments at the expense of the private sector.
a. Reduces the real burden of servicing and repaying the government debt.
b. Increases taxes received on nominal interest and capital gains.
iii. This is a problem facing banks in Vietnam
C. Anticipated inflation has three major costs:
1. Very rapid inflation (e.g. 50% per month) is called hyperinflation
2. At high inflation rates, money loses its value very quickly.
a. The opportunity cost of holding money is the nominal interest rate (rn) which usually increases with the inflation rate (INFRTE).
c. During an inflation, the cost of holding wealth in the form of money becomes very high.
d. Therefore people try to spend their money very quickly.
e. This diverts labor from producing to spending.
f. The resources spent spending money during inflation is called "shoe-leather costs"
3. When prices are rising,
a. price labels on items in stores have to be changed,
b. restaurant menu prices must be changed.
c. Coin operated vending machines have to be changed.
d. These costs are called "menu costs"
e. May be less important in bargaining situations.
4. At a high and variable inflation rate,:
a. resources will be diverted away from production to
b. predicting the inflation rate.
5. If people expect inflation, they may raise their prices even before inflation, thus causing more inflation.
6. Efficiency is lost because people lose track of relative prices.
a. Can't identify how much of the rise in a particular price is:
D. The redistribution problems associated with unanticipated inflation can be resolved by using indexed contracts.
1. Indexing is a technique that links payments made under a contract to the price level (P).
hence
An indexed contract adjusts the number of units of currency paid to changes in the price level (P).
a. Indexing is costly because it is difficult to reach agreement on the index to be used.
b. Indexing tends to increase the rate of anticipated inflation. Vicious circle.
(wage-price spiral)
i. Occurred in the US in 1970s.
ii. Called "COLAs" , Cost of Living Adjustments.
c. Indexation usually occurs at discrete intervals and is usually only partial.
2. Indexation does not solve the problems of shoe-leather costs and menu costs.
(See Begg Ch. 27-1)
A. In purely agricultural societies, there was no unemployment
1. People worked for themselves
2. Wages were a portion of their product
B. When people started working for wages, it became possible for wages to be so high that
1. it was not worth hiring someone.
C. Industrial revolution caused
1. Sticky wages
2. Change in support system for the unemployed from Family to Government
D. Many socialist countries had eliminated unemployment
1. But the cost was:
E. In US conditions of unemployed persons ameliorated by
1. Government unemployment insurance benefits
2. Other earners in family due to
a. Increased labor force participation of women
F. In Vietnam have severance pay from SOEs and retraining programs
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A. Unemployment is a state in which:
1. there are qualified workers available to work (at the current wage rate) and
2. some of them do not have jobs.
B. Measurements differ by country:
1. In the UK only those registered as unemployed are counted as unemployed.
2. The US measures unemployment by sample surveys.
C. In the US, the unemployment rate is the number of unemployed workers (U) divided by the civilian labor force (LF).
UR = (Number of unemployed workers)
Civilian Labor force
a. Civilian labor force excludes:
i. Persons under age 16
ii. People voluntarily out of the labor force (e.g. students, housewives, retirees)
iii. Civilian labor force equals about 1/2 of the population.
D. In the UK, the unemployment rate is the number of unemployed workers divided by the working population.
UR = (Number of unemployed workers)
Working population
E. In the US the labor force is equal to:
1. the number of employed workers plus
2. the number of unemployed workers.
D. In the UK the working population is equal to:
1. the labor force plus
2. members of the armed forces and the self employed.
E. Since the working population is larger than the labor force,
1.The UK measure of the unemployment rate makes unemployment look smaller than the US measure of the unemployment rate.
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A. Each country defines unemployment in its own way
B. In the US a person who is counted as being unemployed falls into one of three groups:
1. The person has no job and has made a specific effort to find a job in the previous 4 weeks.
2. The person must have been:
3. The person must be waiting to start a new job in the next 30 days.
C. The US definitions may inaccurately measure unemployment because:
1. They may overestimate true unemployment because:
a. A person may be looking for work; but may have excessive wage demands.
(e.g. nuclear engineer)
b. May not report "off the books" employment
2. They may understate true unemployment because:
a. they omit discouraged workers and part time workers:
b. Discouraged workers are people who want to find work but
c. Part-time workers are counted as employed.
G. The US experienced its most serious period of unemployment 60 years ago.
1. It was called "The Great Depression".
H. Unemployment rates in the US:
a. 1930-1940 (Great Depression) (15%-25%)
b. 1942-1945 (WW II) (2%-3%)
c. Last 50 years (5% to 10%)
d. Currently (6%)
e. 20th century average (6%)
I. Viet Nam had a population of 66 million in 1990
A. Half (33 million) were of working age
B. 31 million were employed
C. Unemployment rate
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A. Unemployment can be classified into four types:
(Begg 27-2)
1. Frictional,
2. structural,
3. cyclical and
4. classical
B. Frictional unemployment is unemployment which results from normal market turnover, such as:
1. People entering (or reentering) the labor market and looking for jobs.
2. People switching jobs from declining firms to advancing ones.
3. The length of time people take in finding a new job depends on the level of government unemployment insurance.
4. This is the irreducible minimum of unemployment in a dynamic society.
5. Can be reduced by microeconomic policies
a. e.g. improving information about vacancies
C. Structural unemployment is unemployment due to a decline in the number of jobs in a specific region or industry.
1. Some examples are:
a. Coal miners in Pennsylvania
b. Workers in military aircraft industry in California
c. Closure of State Owned Enterprises in Viet Nam
i. Reduced by 29% (800,000) workers between 1988 and 1991 (WB p.66)
d. Reduction in size of the military in US and Viet Nam
2. Structural unemployment is a mismatch between worker skills and location and job opportunities.
a. Firms in the US are reluctant to spend money retraining older workers.
b. By the end of 1992 the government of Viet Nam had established 55 training centers.
i. Actually quite small, trainees equal 4% of unemployment. (WB p.49)
3. The length of time people take in finding a new job depends on:
a. In US, the level of government unemployment insurance.
b. Viet Nam grants lump sum severance benefits instead of unemployment benefits.
4. Can be reduced by microeconomic policies:
a. Retraining
b. Moving allowances or loans.
D. Cyclical unemployment is unemployment which results from a general, economy-wide slowdown in economic activity.
1. Cyclical unemployment is sometimes called:
a. Keynesian unemployment
b. Demand-deficient unemployment
2. Cyclical unemployment occurs when:
a. aggregate demand falls and
b. wages and prices have not yet fallen to restore full employment.
c. In cyclical unemployment, workers are involuntarily unemployed.
i. A worker is involuntarily unemployed if he or she would accept a job offer at the going wage.
3. Keynesian's argue that most unemployment is cyclical
a. Feels that blame for unemployment is society
b. Feels that society must aid the unemployed
E. Classical Unemployment is unemployment created when the wage rate is deliberately maintained above the rate at which:
1. the quantity of labor demanded is equal to the quantity of labor supplied.
2. Classical unemployment can be caused by:
a. Trade Union bargaining power.
b. Government minimum wage laws.
c. Government payroll taxes or mandates
i. (e.g. Social Security tax)
3. Classicals argued that most unemployment was of this type.
a. Feels that blame for unemployment should be put on the individual.
i. Could get a job if accepted a low enough wage rate.
b. Feels that government should not support the unemployed.
F. Full employment (N*) refers to a situation where the number of people looking for work is equal to the number of job vacancies.
1. It does not mean that everyone has a job.
N* < Labor Force
2. There would be workers looking for jobs and firms looking for workers.
3. But the number of unfilled jobs would just equal the number of job-seekers.
4. In full employment all unemployment is:
a. frictional or
b. structural.
G. In the US there has been a steady change in what was meant by full-employment:
1. 1950s = 2% unemployed
2. 1990s = about 6% unemployed
3. Reflects increased concern about inflation
H. The natural rate of unemployment (U*) is the unemployment rate when the economy is at full employment (N*).
1. At the natural rate of unemployment (U*),
a. all unemployment is voluntary.
2. The natural rate of unemployment (U*) includes:
a. Frictional unemployment plus
b. Structural unemployment plus
c. Classical unemployment
3. The natural rate of unemployment (U*) does not include Keynesian, demand-deficient or cyclical unemployment.
a. In the long run, cyclical unemployment will be zero.
b. In the short run cyclical unemployment can be reduced by increasing aggregate demand.
4. The natural rate of unemployment (U*) changes because of changes in the size of frictional, structural and classical unemployment.
a. Changes in the natural rate of unemployment (U*) can only come about through supply side policies.
5. The size and constancy of the natural level of unemployment (U*) is a very controversial issue.
a. It is very difficult to isolate changes in the natural rate of unemployment (U*) from changes in the rate of cyclical unemployment.
(See Begg 27-6)
A. The private costs of unemployment
1. In the case of voluntary unemployment,
a. the private costs are less than the private benefits.
b. The private cost is the wages lost
c. the private benefit is:
2. In the case of the involuntarily unemployed,
a. the private cost is greater than the private benefit.
B. The social cost of unemployment:
1. Voluntary unemployment costs the society output.
a. But it may produce an improved allocation of labor resources due to longer job searches.
2. Involuntary unemployment has four major social costs.
a. loss of output and income,
b. loss of human capital,
c. increase in crime and other social problems, and
d. loss of human dignity.
C. When workers are unemployed, their labor time and the output they would have produced is lost forever.
1. Okun's Law - In the US a 1% increase in unemployment lowers the level of output by 2%.
a. Colander says in the US a 1% increase in unemployment lowers the level of output by 2.5%.
D. A spell of unemployment can hinder career development
1. And thus reduce the value of a worker's education and skills (his or her human capital)
2. In Vietnam severance from SOEs may lead to higher paying jobs in the private sector.
E. An increase in unemployment usually leads to an increase in the crime rate.
1. Due to need for income
2. Due to available time
3. Due to family breakdown
4. e.g. New York and Moscow
H. Workers who are unemployed suffer a loss in self esteem.
1. my grandfather in the Great depression
(Begg 20-4)
A. Gross Domestic Product (GDP) (Y) is the value of:
1. all final goods and services
2. produced in an economy
3. during a year.
B. Final goods and services are those delivered to their ultimate user.
1. (e.g. a meal sold in a restaurant, this lecture)
i. e.g. government services, such as administration, justice, national defense
2. Final goods are included in GDP (Y).
3. Capital goods can be final goods.
a. (e.g. oil drilling rig, a bridge or a road)
C. Intermediate goods and services are those used as an input to the production process.
1. (e.g. rice sold to the restaurant, this chalk)
2. Whether a good is a final good depends on:
a. who buys it and
b. for what purpose.
3. In US
a. Everything consumers buy is a final good
b. Everything governments buy is a final good
i. The US national product accounts make no distinction between government consumption.
ii. This was a political decision
iii. It is bad economics
c. The buildings, equipment and inventories that firms buy are final goods.
4. The raw materials and partly finished goods that firms buy are intermediate goods.
a. Intermediate goods are not counted directly in GDP.
b. If intermediate goods were counted, there would be double counting.
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(See Begg 20-5)
A. Nominal or current dollar (dong) GDP (YN), measures:
1. the value of the nation's final output of goods and services
2. using the current prices of the goods and services.
B. Real GDP (Y), or constant dollar (dong), measures:
1. the value of the nation's final output of goods and services
2. using the prices of the goods and services that prevailed in a previous base period.
C. Changes in real GDP (Y) indicate changes in the nation's production of goods and services.
D. In most countries real GDP (Y) follows a long term upward trend.
1. In US long term growth rate in real GDP is 3.5 % per year.
2. The trend for real GDP (Y) is due to:
a. Increases in population (POP)
b. Increases in the nation's capital stock (K)
c. Advances in technology
3. Benefits of rapid growth of real GDP (Y).
It increases our options. We can have more:
a. health care
b. research
c. Protection of the environment.
3. Costs of rapid growth of GDP (Y).
a. Depletes natural resources more rapidly
b. Causes waste disposal problems.
c. Forces rapid changes in people's jobs.
E. Rule of 70 (72).
1. The doubling time (DT) will equal 70 divided by the growth rate (GR).
a. DT = 70 / GR
b. If GR = 7% per year, then DT equals 10 years
F. Since 1989, growth rate of real GDP (Y) has been very rapid.
Year Growth rate of Real GDP
1989 8.0 %
1990 5.1 %
1991 6.0 %
1992 8.3 %
1. Average rate of growth of real GDP 1989- 1992 was 6.9%
2. Implies doubling real GDP about every 10 years
3. Source: (WB p. 6)
G. Sources of growth in Viet Nam
1. Increases in population (POP)
a. Growing at 2.2% per year (WB p. 2)
2. Increases in the nation's capital stock (K)
a. Investment in new capital goods equal 12% of GDP.
3. Advances in technology
a. International competition
H. Costs of growth in Viet Nam
1. Environment:
a. Forest cover declined from 40% of land area to 25% of land area in last 25 years. (WB p. 2)
2. Social sectors
a. Slowdown of progress in health and education
(See Begg 26-9 and 31-1)
A. Fluctuations in real GDP (Y):
1. Keynesian economists think they are quite costly and should be eliminated.
2. Classical economists suggest that these fluctuations are the result of natural changes.
a. Represent changes in structural unemployment
b. and smoothing them would harm society for
i. it would delay the implementation of new technologies.
B. The term "business cycle" is used to describe the irregular up and down fluctuations in economic activity.
1. The business cycle can be defined as "the tendency for output and employment to fluctuate around their long term trends".
C. The business cycle is measured by up and down movements of real GDP (Y).
D. The business cycle is misnamed.
1. It is not a regular predictable phenomenon like the swinging of a pendulum, or the tides.
2. They are not uniform in
i. In US have been less intense in last 50 years.
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A. The business cycle has four phases. They are:
1. contraction,
2. trough,
3. expansion, and
4. peak.
B. A contraction is a slowdown in economic activity.
1. Sometimes the first part of a recession is called "a downturn"
2. In the US a recession is said to occurs when:
a. Real GDP (Y) declines for two or more successive quarters
C. An expansion is a speedup in economic activity
1. Sometimes the first part of an expansion is called an "upturn"
2. An expansion is an upturn that lasts two or more quarters
D. A trough is the low point of a business cycle, where a contraction turns into an expansion.
1. A very deep trough is called a depression
2. There is no formal definition of a depression
a. "If you lose your job, that is a "recession", but if
b. I lose my job, "that is a depression"
E. A peak is the high point of a business cycle,
1. where a expansion turns into a contraction.
2. A very high peak is called a "boom".
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A. Business cycle fluctuations in unemployment (U) closely follow fluctuations in real GDP (Y).
B. The US stock market prices are not closely linked to fluctuations in real GDP (Y).
1. We are not able to predict the movements of the business cycle very well.
C. Generally fluctuations in the rate of inflation follow the business cycle,
1. In upswing, prices rise faster
2. In downturn, prices rise more slowly
3. but there have been important exceptions.
a. e.g. stagflation in 1970s
V. The Government Deficit
(See Begg 22-3)
A. The government deficit is equal to the total expenditures of the government (G) minus its net taxes (taxes less transfer payments) (NT).
1. Government budget deficit = D = (G - NT)
B. In the US, the government deficit is about 3% of GDP.
C. In Viet Nam
1. the fiscal deficit (primary balance) fell from
a. 8.4 % of GDP in 1989 to 1.7 % of GDP in 1992 (WB p. 4)
2. If government interest payments are included, the deficit fell from:
a. 11.4 % of GDP in 1989 to 3.8 % of GDP in 1992. (WB p. 11)
C. The effect of the business cycle on the government's deficit:
1. In an expansion,
a. tax (TX) revenues increase
b. unemployment benefits (TR) decrease
c. the government's deficit (D) tends to decrease.
d. (This did not happen in US expansion of 1980s.)
2. In a recession,
a. tax revenues (TX) decrease
b. unemployment benefits (TR) increase
c. the government's deficit (D) tends to increase.
VIII. The International Deficit
(See Begg 29-2)
A. The trade balance (TB) is
1. the value of goods sold to foreigners (exports) (X), less
2. the value of goods purchased from foreigners (imports) (Z).
TB = X - Z = NX
B. The current account balance is made up of
1. the trade balance plus
2. interest on international debts plus
3. international transfer payments - "remittances".
C. If the current account balance is:
1. Positive, the country has a current account surplus.
2. Negative, the country has a current account deficit.
D. If a country has a current account deficit, it must:
1. Pay the difference with its international reserves or
2. borrow from the rest of the world.
B. The US current account deficit.
1. Until recently the US had a current account surplus.
2. Now US current account deficit is very large
3. The US now borrows a great deal from the rest of the world.
C. The UK also has a current account deficit
D. In Vietnam
1. The balance of trade is improving
a. Deficit of US$350 million in 1989
b. Deficit of US$ 60 million in 1992
2. Must make interest payments of US$ 200 million a year
a. Had a hard currency debt of US$ 3 billion at end of 1992
(WB pp. 15-16)
Inflation
Inflation is an upward movement in the average level of prices. To measure the average level of prices, we calculate a price index. The inflation rate is the percentage change in the value of a price index.
Inflation is a persistent feature of life in most countries. In 1980, the US the rate of inflation exceeded 13% a year. It has been on a downward trend ever since.
Inflation is a problem because it brings a fall in the value of money at an unpredictable rate. The more unpredictable the inflation rate, the less useful is money as a measuring rod for conducting transactions. Inflation makes money especially unsuitable for transactions that are spread out over time, such as borrowing or lending or working for an agreed wage rate. Even if it is anticipated, a rapid inflation rate is a problem because it makes people get rid of their money as soon as possible, thus disrupting economic life.
Unemployment
Unemployment is a situation in which there are qualified workers who are available to work at the prevailing wage rate and who do not have jobs. The labor force is the sum of those who are unemployed and those who are employed. The unemployment rate is the percentage of the labor force that is unemployed. In the United States unemployment is measured each month by a survey of households.
Unemployment was not a major problem in the U.S. in the 1960s but it increased until 1982. Since then it has declined to about 6% of the labor force.
There are three types of unemployment: frictional, structural and cyclical. Frictional unemployment arises from the normal labor market turnover and the fact that people take time to find the job that best matches their skills. Structural unemployment arises when technological change causes a decline in jobs that are concentrated in particular industries or regions. Cyclical unemployment arises when the pace of economic expansion slows down. Full employment is a situation in which all unemployment is frictional and structural and the number of job vacancies is equal to the number of unemployed workers. At full employment, the unemployment rate is called the "natural" rate of unemployment.
The major costs of unemployment are the lost output and earnings that could have been generated if the unemployed had been working. Other major costs include the deterioration of human capital and, when unemployment is prolonged, increased crime and severe social and psychological problems for unemployed workers and their families.
Gross Domestic Product
The nation's total output is measured by gross domestic product (GDP). GDP is the dollar value of all final goods and services produced in the economy in a given time period. Changes in GDP reflect both changes in prices and changes in the quantity of goods and services produced. To separate the effects of prices from real quantities, we distinguish between nominal GDP and real GDP. Nominal GDP is measured by using current prices. Real GDP is measured by using prices from some base year.
Real GDP grows, on average, every year, so the trend of real GDP is upward. But real GDP does not increase at a constant rate. Its rate of expansion fluctuates, so real GDP fluctuates around its trend value. Increases in real GDP bring rising living standards but not without costs. The main costs of fast economic growth are resource depletion, environmental pollution and the need to face rapid and often costly changes in job types and locations. The benefits of higher consumption have to be balanced against such costs.
The Business Cycle
The business cycle is the periodic but irregular up and down movement in macroeconomic activity. The cycle has four phases: contraction, trough, expansion, and peak. When real GDP falls for two consecutive quarters we say that an economy is in a recession.
Unemployment fluctuates closely with real GDP fluctuations. When real GDP is above its trend, the unemployment rate is low; when real GDP is below trend, the unemployment rate is high. But prices on the stock exchanges do not fluctuate in a manner similar to business cycle fluctuations. Sometimes a crash in stock market prices precedes an inflation, sometimes it does not.
There is no simple relationship between the inflation rate and the business cycle. Sometimes the inflation rate increases with an expansion phase and decreases with a contraction phase. But there are other times when inflation moves independently of the business cycle. Thus there are two types of forces at work generating inflation that have to be investigated-those that are related to the business cycle and those that are not.
Government Deficit and the International Deficit
The Government deficit is the total expenditure of the government sector minus the total revenue of that sector in a given period. To some degree the government deficit fluctuates fluctuates over the course of the business cycle. In the 1980s, the US government operated with a deficit of 3% of GDP even though the economy was undergoing a strong expansion in GDP.
A country's current account balance is the difference between the value of the goods and services that it sells to other countries and the value of the goods and services that it buys from the rest of the world. The United States normally had current account surpluses before the 1980s, but since then it has had very large deficits. Japan on the other hand has had large current account surpluses in the 1980s.
19. Keynesian Unemployment (that nghiep theo ly thuyet Keynes)
19. Labor force (Luc luong lao dong)
20. Natural rate of unemployment (Ty le that ngiep tu nhien)
21. Net taxes (NT) (thue rong)
21. Nominal GDP
22. Nominal income*
22. Okun's Law
22. Peak
23. Price index
24. Price level
24. Price stability*
25. Real income*
25. Real GDP
26. Recession
27. Structural unemployment (that ngiep do co cau)
27. Tax indexation*
28. Trough
29. Unanticipated (unexpected) inflation
30. Unemployment (that nghiep)
31. Unemployment rate
32. Upturn
32. Value of money
Questions based on lecture 4
1. What were some of the major costs of the recent inflation in Viet Nam? Who were hurt the most by the inflation?
2. If it were not possible to precisely control the price level in Viet Nam, would it be better to have a constant 10% annual rate of inflation or an inflation rate that randomly fluctuated between 0% and 10% per year?
3. What would be the best way to measure the rate of unemployment in Viet Nam? Would your proposed measure be more likely to overstate or understate the true rate of unemployment?
4. If the government of Viet Nam decided to reduce the unemployment rate to 0%, what would be the costs and benefits of such a policy?
5. If the government of Viet Nam decided to let the level of unemployment be determined by the forces of supply and demand in the labor market, what would be the costs of such a policy?
6. If it were possible to eliminate business cycles in market-based economies, would it be desirable to do so?
7. How important were government deficits as a factor in the recent episode of inflation in Viet Nam?
8. The United States had a low rate of inflation for the last ten years even though it had large government deficits. Can this situation continue indefinitely?
9. In order to achieve its goal of doubling per capita incomes by the end of the century, should Viet Nam try to run a large surplus on it's current account?
10. If per capita income in Viet Nam doubles by the end of the century, what are the costs that will probably result from that growth?