Macroeconomics

F I G U R E

9 - 4

1951

1984

1987

1966

1971

1963

1975

1982

1991

2001

2003

−3%

−2

−1

0

Change in unemployment rate

Percentage change 

in real GDP

1

2

4

3

10

8

6

4

2

0

−2

2008

---

C H A P T E R   9

Introduction to Economic Fluctuations

| 263

correlated with the utilization of the economy’s labor force. The declines in the

production of goods and services that occur during recessions are always associ-

ated with increases in joblessness.

Leading Economic Indicators

Many economists, particularly those working in business and government, are

engaged in the task of forecasting short-run fluctuations in the economy. Busi-

ness economists are interested in forecasting to help their companies plan for

changes in the economic environment. Government economists are interested in

forecasting for two reasons. First, the economic environment affects the govern-

ment; for example, the state of the economy influences how much tax revenue

the government collects. Second, the government can affect the economy

through its use of monetary and fiscal policy. Economic forecasts are, therefore,

an input into policy planning.

One way that economists arrive at their forecasts is by looking at leading