Unemployment: percentage of people who do not have jobs, but are in labor force Labor force: Employed + Unemployment Not in labor force:   Kids  Military personnel  Mentally insane  Imprisoned  Stay-at-home-moms/dads  Full-time students  Retired people  Discouraged workers Employed: 16 years or older and have a job Unemployed: 16 years or older and don't have a job actively looking for a job for at least 2 weeks Unemployment rate [(# of unemployed)/(Labor force (# of employed + unemployed))]x100 Types of unemployment Seasonal: Waiting for right time to conduct business Ex: Mall santa, lifeguard, school bus driver, concession stand Frictional: New opportunities, change in educational level, change in lifestyle, change in choices, in between jobs Structural: Lack of skill, change in technology, declining industry Cyclical: Downturns in business cycle bad for society as well as individuals Recession Full employment (FE) NRU (Natural rate of unemployment) = 4-5% Okun's law: For every 1% of unemployment above the NRU, causes a 2% decline in Real GDP

Inflation

Types of Inflation Cost-push inflation: higher production cost increase price, usually result of supply shock Increasing costs force producers increase prices. Demand-pull inflation: too many dollars chase too few goods. Demand pulls up ptices, therefore shortage created and overheated economy with excessive spending and same amount of goods. Political panics: depression, recession.

Rate of Inflation

CPI2-CPI1      x100
    CPI1        



Help

1. Debtors
2. Business were the price of the product increases faster than the price of the resources

Hurt

1. Lenders
2. People with fixed income.
3. Savers
4. Fixed Wage

Consumer Price Index

CPI- Consumer Prize Index

(Cost of the market basketin a given year)    x100
(Cost of the Market basket in a base year)

Real VS Nominal GDP

Real   Value of output produced IN CONSTANT OR BASE YEAR PRICES   Can increase from year to year; only if output increases   Used to calculate economic growth   *Real= P(current)•Q(current) Nominal   Value of output produced IN CURRENT PRICES   Can increase from year to year; if either output or prices increase   Used to calculate inflation   *Nominal= P(base)•Q(current) GDP Deflator    Base year GDP Deflator is 100    Years after base year, GDP Deflator greater than 100    Years before base year, less than 100    * (Nominal GDP)                                •100       (Real GDP)

GDP

GDP: Gross domestic product. 

   Total value of all final goods and services produced within country's borders within a year.

 All production on income earned in the U.S.

GNP: Gross national product. Total value of all final goods and services produced by Americans in a given year.
   American in another country counted

Included:
 Final goods and services

 Income earned 

 Wages

 Rents

 Interests

 Payments

 Interest payments or corporate bonds

 Current production of final goods

 Unsold output (business inventories)

Excluded
--Transfer payments (public and private)

 Intermediate goods: avoid multiple counting 

(social security, unemployment compensation, scholarships cannot be transferred)

 No sell of stocks and bonds; Used or second-hand goods

 Non-market transactions (babysitting, illegal drugs, prostitution

 DIY repairs, growing own vegetables, etc)

Expenditure Approach
-GDP = C + Ig + G + Xn
-- Personal consumption + Gross-private Domestic Investment + Gov't spending + Net exports (exports - imports)

Income Approach (FOP)
-GDP = W + R + I + P
-- Wages ( salaries / compensation of employees ) + Rents ( rental income ) + Interest ( interest income ) + Proprietor's Income

National Income = 

                     CE                     +     PI                     +         RI           +           II            +         CP
--Compensation of Employment + Proprietary Income + Rental Income + Interest Income + Corporate Profits

National Income = 

  GDP -           IBT                    -     DepRate  -            Net FFP

--GDP - Indirect business taxes - depreciation - Net foreign factor payment

Disposable Income = National Income - Household taxes + Gov't transfer payment

DPI                        =          NI            -            HT           +             GTP

Budget =

 Transfer Payments +                     GPGS                         -             GTFC

--Transfer payments + Gov't purchase of goods and services - Gov't tax and fee collection
* + Deficit, - Surplus

Trade = exports - imports
* + Surplus, - Deficit

-NDP  = GDP - DepRate

--Net domestic product - NNP = GNP - DepRate

--Net national product - GNP = GDP - NetFFP

Circlular flow

Circular flow- Represents flow of money, goods, and services.

   Factor market (resource): 4 Factors of production: where they're bought and sold.

   Product market (Goods): where goods and services are bought and sold

   Firm: A business or organization producing goods and services for sale

   Household: Person or group of people sharing income