Measurement of Economic Performance

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Presentation transcript:

Measurement of Economic Performance Unit Review

Topics to Review CPI Inflation / Deflation Unemployment & the labor force Types of Unemployment Real vs Nominal GDP & how to calculate it Circular Flow

Will each of the following transactions be included in GDP for the United States? Explain why or why not Coca-Cola builds a new bottling plant in the United States Delta sells one of its existing airplanes to Korean Air Ms. Moneybags buys an existing share of Disney stock A California winery produces a bottle of Chardonnay and sells it to a customer in Montreal, Canada

Answer – 1 point each Yes, New structures built in the U.S. are included in U.S. GDP No., The airplane is used, and sales of used goods are not included in GDP No, this is a transfer of ownership – not new production Yes, this is an export

Unemployment: write the formulas for each of the following terms Size of the labor force Labor force participation rate The unemployment rate

Answers – 1 point each Employment + unemployment = labor force (labor force / population) x 100 = labor force participation rate (unemployment / labor force) x 100 = unemployment rate

Unemployment Define the natural rate of unemployment The natural rate of unemployment is made up of which of the types of unemployment Explain how cyclical unemployment relates to the natural rate of unemployment

Answers – 1 point each The natural rate of unemployment is the normal unemployment rate around which the actual unemployment rate fluctuates The natural rate of unemployment is made up of frictional unemployment Cyclical unemployment is the deviation of the actual rate of unemployment from the natural rate. Or, cyclical unemployment is the difference between the actual and natural rates of unemployment