Macro Concepts Aggregate Supply and Aggregate Demand GDP Unemployment Inflation

GDP Total value of all final goods and services produced within a country within a given year. Real GDP- accounts for inflation. C + I + G + NX _______ _______ _______ ___________

GDP C + I + G + NX Don’t Count Used Transfers Non-market Intermediate goods

Business Cycle Recession- real GDP goes down for at least 6 months. R

I N J E C T O S L E A K G S

GDP Expenditure Method- C+I+G+Nx Income Method of GDP- National Income R+I+P+W Rent + Interest + Profits + Wages Greatest Component of each?

All Stats are for People 16 or Older Population = 1000 Pop. with jobs = 600 Pop. Without jobs = 400 Pop. Actively seeking employment in past month = 190 Pop. from previous category who currently have a job = 40

Unemployment Unemployment Rate= Unemployed Persons/Total Labor Force X 100 Labor Force= all civilians 16+ who are working or looking for a job Unemployed Persons= 16+ civilians who are looking for a job but do not have one

Agenda Unemployment Inflation Types of Unemployment Labor Force Participation Rate Employment to Population Ratio Inflation Types Measures Movies

Unemployment (National)

Types of Unemployment Frictional- temporary while searching Structural-lack of skills/lack of need for skills/replacement by technology/replacement by merger or streamlining Cyclical- related to health of overall economy Seasonal- seasonal Not

Labor Force Participation Rate % of working age people who are Working Looking for a Job Working Age 16-64

Not Unemployed If… Under 16 Have a Job Are not actively seeking a job Are not currently available to work

Unemployment Formula Unemployment Rate= Unemployed Persons/Total Labor Force X 100 Labor Force= all civilians 16+ who are working or looking for a job Unemployed Persons= 16+ civilians who are looking for a job but do not have one

Unemployment (National)

Labor Force Participation Rate

Labor Force Participation Rate

Labor Force Participation Rate

Labor Force Participation Rate % of working age people who are Working Looking for a Job Working Age 16-64

Employment to Population Ratio Employment Rate Employed/*Total Population Working Age (16-64) 25-54

Employment to Population Ratio 16-64

Employment to Population Ratio 25-54

Unemployment Relation to Business Cycle Unemployment Rate Calculation Types of Unemployment Labor Force Participation Rate Employment Rate (Employment to Population Ratio)

Frictional Structural Cyclical Seasonal Not

Calculate Population = 10,000 Population 16-64 = 8,000 Employed Persons = 5,000 Unemployed Persons = 350 --------------------------------------------------------- Labor Force = ____________ Unemployment Rate = ______________ Labor Force Participation Rate = _______

Calculate Population = 10,000 Population 16-64 = 8,000 Employed Persons = 5,000 Unemployed Persons = 350 --------------------------------------------------------- Labor Force = 5,350 Unemployment Rate = 6.54% Labor Force Participation Rate = 66.88%

Labor Force Participation Rate % of working age people who are Working Looking for a Job % working age population in the labor force Working Age 16-64

Natural Rate of Unemployment Sum of frictional and structural unemployment If Unemployment Rate – Natural Rate = 0 Full Employment- Job Finding Rate = Jon Separation Rate Natural Rate is Long Term Rate

Inflation

Demand-Pull Inflation

Cost-Push Inflation

Stagflation

Inflation Indexes GDP Deflator Consumer Price Index converts a “changing basket of goods” into constant dollars. Find Real GDP Consumer Price Index Measures price change of a “fixed basket” based on price paid by consumer Cost of Living Adjustments Producer Price Index Measures price change of a “fixed basket” based on price paid consumer Supplier contracts

Inflation Indexes Nominal- $ amount in current year $s Real- $ amount in constant $s Converted to base year $s Base Year = 100 Real = Nominal $/Index X 100

CPI (Consumer Price Index)

Costs of Inflation Unit of Account Costs Menu Costs Shoe leather costs uncertainty about spending and investment Menu Costs cost associated with changing prices Shoe leather costs Increased financial transactions Redistribution of Wealth Lenders lose and borrowers gain with unanticipated inflation and fixed rates Savings devalue