1. Unit 3 Macroeconomics

2. Unit Vocabulary Gross Domestic Product Aggregate Supply Business Cycle
Consumer Price Index
Unemployment Rate
Monetary Policy
Fiscal Policy
Interest Rates
Discount Rate
Reserve Rate
Open Market Operations
Aggregate Demand
Aggregate Supply
Inflation
Deficit
Real
Nominal
Structural Unemployment
Cyclical Unemployment
Frictional Unemployment

3. How do doctors measure our health?
Tools to measure the economy:
Gross Domestic Product – total value of all FINAL goods and services produced WITHIN the United States
Only final goods counted to avoid double counting
Includes all Consumer goods (C) + Investments (I) + Government Purchases (G) + Net Exports (Exports – Imports)  CIGNX
Measured usually over 1 year
Real v Nominal: Nominal is GDP in current prices, Real is GDP adjusted for inflation

4. Consumer Price Index
Price index that measures the cost of a particular “basket” or group of goods
Compares the value of the basket in one time period to a particular base year
Measures price increases or “inflation”
Inflation is an increase in the overall average of prices in the economy

5. Unemployment Rate What does it mean to be UNEMPLOYED?
What causes unemployment?
How can we fix unemployment?

6. Unemployment occurs when people want jobs but can’t find them
People are in the labor force if they are 16 – 62 and are ACTIVELY SEEKING work
Unemployment rate is the number of people who are unemployed / the # of people in the labor force

7. 3 Types of Unemployment
Frictional: people are temporarily out of a job but will be working again soon
Ex. People who quit 1 job to go to another, seasonal employees
Structural: people are unemployed because their job skills are no longer needed
Ex. Employees at a car plant when new technology is brought in
Cyclical: people who are unemployed due to drops in the business cycle
Business cycle is the pattern of contractions (recessions) and expansions (growth) in the economy
Recession is at least 6 months of decline in economic growth

8. Business Cycle Peak Contraction Expansion Trough 4 Stages:
Bottoming out & move into expansion
Trough