Measures associated with Real GDP

Real GDP trend: Long-term movement in Real GDP data. Several techniques.

Real GDP growth: Example: 2005 US Real GDP (constant US$) = billions 2006 US Real GDP (constant US$) = billions

Average growth rates: US:3.2% ARG:2.1%

Real GDP growth volatility: where In this case x = real GDP growth Example:

Business cycle :

Unemployment Basic definitions Labor force: People 16 years old or older who are employed or looking for work. Employed: Any person 16 years old or older (1) who works for pay, either for someone else or in his or her own business for 1 or more hours per week; (2) who works without pay for 15 or more hours per week in a family enterprise; or (3) who has a job but has been temporarily absent, with or without pay. Unemployed: A person 16 years old or older who is not working, is available for work, and has made specific efforts to find work during the previous 4 weeks.

labor force = employed + unemployed unemployment rate = unemployed employed + unemployed population = labor force + not in labor force labor force participation rate = labor force population

Unemployment rates across the world

Types of unemployment: Frictional unemployment: The portion of unemployment that is due to the normal working of the labor market; used to denote short-run job/skill matching problems. Structural unemployment: The portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries. Cyclical unemployment: The increase in unemployment that occurs during recessions and depressions.

Inflation Price index (PI) (level): Numerical time series measure designed to help compare how the prices of some class of goods and/or services, taken as a whole, differ between time periods. Consumer price index (CPI) Based on a bundle that is meant to represent the “market basket” purchased monthly by the typical urban consumer. Producer price indexes (PPI) Measures of prices that producers receive for products at all stages in the production process.

Inflation ( ) (change): An increase in the overall price level. Deflation refers to a decrease in the overall price level.

US alone

US and Argentina together Accumulated inflation: US:580% ARG: 248,370,890,124,673 %

Costs of inflation 1) It reduces the overall standard of living by making goods and services more expensive (false statement) People’s income from wages and salaries, profits, interest, and rent increases during inflations. 2) Changes the distribution of income If your income is fixed and prices rise, your ability to purchase goods and services falls proportionately. Indexation. 3) Effects on debtors and creditors If the actual inflation is higher (lower) than the expected inflation debtors (creditors) benefit. 4) Administrative Costs and Inefficiencies Alternative use of time. Intense use of banks. Relative prices uncertainty. 5) Increased risk, reduced investment and slower economic growth