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Going Big!!!!! Micro Macro Price Quantity Costs Revenues Profits Firms

Published byMarion Thompson Modified over 6 years ago

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Presentation on theme: "Going Big!!!!! Micro Macro Price Quantity Costs Revenues Profits Firms"— Presentation transcript:

1 Going Big!!!!! Micro Macro Price Quantity Costs Revenues Profits Firms
GDP Unemployment Inflation Interest Rates Money Supply Exchange Rates

2 Economic Indicators Business Cycle Unemployment Rate Inflation
“Real” GDP versus “Nominal” GDP Deflator C+I+G+NX 6 month contraction = Recession Unemployment Rate 4 Types Calculation Inflation CPI/GDP Deflator Cost of Living Adjustment “Real” Income

3 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 _______ _______ _______ ___________

4

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

6 GDP C- Consumption (almost 70%) C + I + G + Xn
Durable Goods Non-Durable Goods Services (45%) C + I + G + Xn _______ _______ _______ ___________

7 GDP I- Investment (15%) C + I + G + Xn
Business Investment Business Unsold Inventory *Real Estate- commercial and residential C + I + G + Xn _______ _______ _______ ___________

8 GDP G- Government Spending (18%) C + I + G + Xn
_______ _______ _______ ___________

9 GDP Xn- Net Exports (-500 billion) C + I + G + Xn
Add exports Subtract imports Trade Balance- deficit or surplus C + I + G + Xn _______ _______ _______ ___________

10 Business Cycle

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

12

13

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

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

16 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

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

18 Unemployment (National)

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

20 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

21 Natural Rate of Unemployment
Sum of frictional and structural unemployment If Unemployment Rate – Natural Rate = 0 Full Employment Natural Rate is Long Term Rate

22

23 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

24 Labor Force Participation Rate
% of working age people who are Working Looking for a Job Total 16+ Working Age 16-64 Prime 25-54

25 Unemployment (National)

26 Labor Force Participation Rate

27 Labor Force Participation Rate

28 Labor Force Participation Rate

29

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

31 Types of Inlfation Demand Pull Cost-Push

32 Demand-Pull Inflation

33 Cost-Push Inflation

34 Stagflation

35 Shocks Large, unexpected change in AD or AS
Demand Shock v. Supply Shock Positive v Negative Usually temporary

36 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 (COLA) Producer Price Index Measures price change of a “fixed basket” based on price received by producer Supplier contracts

37 Convert Nominal to Real using Price Index
Nominal $$$$ x 100= Real $$$ Price Index Example: nominal GDP = $900 2010 GDP Deflator = 125 What is the real GDP? What was the rate of inflation between the base year and 2010?

38 Real v. Nominal Interest Rates
Nominal = Real Rate + expected inflation rate Real = Nominal – expected inflation rate Who benefits from unexpectedly high inflation? Who benefits from unexpectedly low inflation or deflation?

39 Real v. Nominal Interest Rates
Nominal = Real Rate + expected inflation rate Real = Nominal – expected inflation rate Who benefits from unexpectedly high inflation? Who benefits from unexpectedly low inflation or deflation?

40 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

41 Natural Rate of Unemployment
Sum of frictional and structural unemployment If Unemployment Rate – Natural Rate = 0 Full Employment- Natural Rate is Long Term Rate

42 Agenda Today Inflation and Interest Costs of Inflation Calculation Review Indicator Research Tomorrow Review Finish Research

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

44 Real v. Nominal Interest Rates
Nominal = Real Rate + expected inflation rate Real = Nominal – expected inflation rate Who benefits from unexpectedly high inflation? Who benefits from unexpectedly low inflation or deflation?

45 Costs of Inflation Shoe Leather Costs Menu Costs Unit of Account Costs
requires more bank transactions requires changing payment plans and increased transfer activity Menu Costs Businesses must change prices on menus, shelves, tags and in computer system Unit of Account Costs Dollars as a unit for measuring value become less stable and reliable.

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

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

48 Demand-Pull Inflation

49 Cost-Push Inflation

50 GDP C + I + G + NX Or R+W+I+P = Income Method (National Income)
Don’t Count Used Transfers Non-market Intermediate goods

51 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

52 Real v. Nominal

53 Basket of Goods 2020 = $400 (base year) 2021 = $500 Inflation Rate = $ 2021- $ Base Year $Base Year

54 Basket of Goods 2020 = $400 (base year) 2021 = $500 Inflation Rate = $ 500- $ 400 $400 Inflation Rate = .25 or 25%

55 Index Value 2020 = = 125 Nominal GDP 2020 = $20 trillion 2021 = $28 trillion Real GDP 2021 = $

56 Index Value 2020 = = 125 Nominal GDP 2020 = $20 trillion 2021 = $28 trillion Real GDP 2021 = $22.4 trillion

57 GDP Growth Rate Nominal 2020 = $20 trillion 2021 = $28 trillion Nominal Growth Rate?

58 GDP Growth Rate Nominal 2020 = $20 trillion 2021 = $28 trillion Nominal Growth Rate ($28-$20)/$20 = .4 40% nominal growth

59 GDP Growth Rate Real 2020 = $20 trillion 2021 = $22
GDP Growth Rate Real 2020 = $20 trillion 2021 = $22.4 trillion Real Growth Rate?

60 GDP Growth Rate Real 2020 = $20 trillion 2021 = $22
GDP Growth Rate Real 2020 = $20 trillion 2021 = $22.4 trillion Real Growth Rate? ($22.4-$20)/$20 = % real growth

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

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

63 CPI (Consumer Price Index)

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