The business cycle model illustrates short term fluctuations in the level of economic activity along a long-term trend. Identify the two phases of the business cycle and describe what changes are happening with output, sales levels and employment in each phase.

Explain the four different types of unemployment in the economy and identify which type of unemployment is directly affected by changes in the business cycle.

One method to measure inflation in the economy is the Consumer Price Index (CPI). Explain how and by whom the CPI is constructed and discuss the shortcomings of using it to definitively measure the level of inflation in the economy.