LET’S TRY IT! IS IT COUNTED IN GDP? WHICH PART? 1. A farmer’s purchase of a new tractor. 2. A plumber’s purchase of a used truck. 3. The services of a mechanic fixing the radiator on his own car. 4. The government’s purchase of a new submarine for the Navy. 5. A Social Security check from the government. 6. A barber being paid to cut someone’s hair. Warm Up

The Power of Inflation

Germany 1932

The Great Depression and Unemployment

What Unemployment can mean

Inflation and Unemployment What is inflation and what does it mean to GDP and Macro Economics?

Inflation Inflation in the rise in or increase in the average price of goods and services bought by the average consumer. When Prices go up, we get less for our money.

2 Types of Inflation Cost Push Inflation: Situation in which aggregate (total) supply suddenly falls, while demand stays the same, resulting in shortages and higher prices. Demand Pull Inflation: Situation in Which aggregate (total) demand rises faster than producers can supply goods and services, resulting in shortages and higher prices.

Hyperinflation A very high level of inflation for several consecutive months. This level of inflation can approach 100 %. The level of inflation is so high that currency (money) is worthless because there is so much of it. This means you could pay one hundred dollars for a coke!!! Remember the pictures of Germany?

Stagflation Stagflation: Situation in which prices increase but the economy does not grow. This is when there is a shortage in supply that causes the prices to increase, but due to the prices increasing there is no change in demand.

Stagflation Graph

Deflation Deflation: Decrease in the average price of goods and services. This might be caused by a surplus in goods and services that cause a drop in price. So you spend less but could still be buying more.

Consumer Price Index CPI: The price or value of a group of goods. CPI is used to track the level of inflation from year to year. This allows for a more accurate view of the Gross Domestic Product and the condition of the nation’s economy. Market Basket of goods: a group of everyday items used to calculate CPI.

Cost of living Adjustment Cost of Living Adjustment: Contract agreement in which wages increase at the same rate as inflation. Need more money to live when it takes more money to buy things.

Employment/Unemployment Employment: Being paid money to perform a job or service Unemployed: A person who is able to work and is looking for work but cannot find a job is considered unemployed. Unemployment rate: Percentage of people in the labor force who are looking for work.

Types of Unemployment Structural Unemployment: Type of unemployment that occurs when the skills of he labor force do not match those that employers need. Frictional Unemployment: Type of unemployment that occurs when people decide not to take a job that does not suit their talents, needs, or desires.

Types of Unemployment Continued Cyclical: Type of Unemployment that occurs because of a downturn in the economy. Seasonal: Type of unemployment that occurs among people whose jobs depend on the weather. Such as farm hands and construction workers.