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?