Cost of Economic Instability Stagflation Great Word!!! This is a time of stagnant growth combined with inflation The Economic Costs The GDP Gap Difference between the actual GDP and potential GDP It is an opportunity cost…remember that word? By giving up employees production drops Aircraft has to layoff, but…what are the costs? Economic Cost Misery Index Also called the discomfort index Sum of monthly inflation and unemployment rates Comprehensive measure of consumer suffering Misery index Economic Costs Uncertainty Consumers do not buy because of uncertainty What is going on with GM sales and all domestic auto sales now? The Kansas City Star reported this weekend that all Saturn dealerships in the city would close. Producers raise prices instead of expand Social Costs Wasted Resources Idle employees are a waste…aircraft workers that have been given a pink slip. Will they come back? Factories that are not being used…Maytag for years is finally put to use. http://www.cbsnews.com/stories/2008/11/21/eveningnews /main4626116.shtml?source=search_story Social Cost Political Instability When times are hard, incumbents are thrown out. Bill Clinton defeated George Bush in a recession Did Republicans have a chance in 2008? How about Democrats this time around? Has anyone listened to President Obama and Former President Bush lately? Let’s look at votes in the past 270 to Win Social Costs Crime and Family Values Have you heard about the Salvation Army kettles at Christmas? How about the man that brought his daughter to a robbery? When an economy is healthy people can deal with problems People are more certain they can take care of their families and businesses can hire more employees Taxes provide for protection, but what if people can not pay?