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Econ ch. 7&8
GDP, inflation, unemployment
| Term | Definition |
|---|---|
| Types of unemployment | Frictional (fired, first-time entries) Structural (made obsolete by technology) Cyclical (Recession) Seasonal |
| Unemployment rate formula | # of unemployed -------------------------------------------X 100 # eligible for labor + unemployed (Labor force) |
| Expenditure approach to measuring GDP | C + Ig + G + Xn Consumption Gross private domestic investment Government purchases Net exports |
| Labor force participation rate | Total employed/looking for employment (NOT DISCOURAGED) -----------------------------X 100 Total eligible for labor (labor force) |
| Not/under counted in unemployment rate | Part time workers (counted as full-time, regardless of actual hours worked) Discouraged workers |
| Natural unemployment rate | Frictional + structural |
| Consumer Price Index (CPI) formula | Current cost of market basket ----------------------------------------X 100 Base year cost of market basket |
| Inflation rate formula | |
| CPI definition | Consumer Price Index |
| PPI definition | Producer Price Index |
| Real interest rate = | nominal - anticipated interest rate |
| Current US labor force participation rate | 62.4% |
| U-3 | 3.7% |
| U-7 | 7.2% |
| Current US labor force | 162 million |
| # of jobs created last month | over 350,000 |
| Current US GDP | $ 25 trillion |
| US real per-capita GDP | 67,000 |
| Per-capita GDP formula | GDP -------------- X 100 Population |
| Income approach to measuring GDP | Add up the products of the 4 factors of production (GDI) Wages + Rent + interest + profit |
| Nominal GDP = | Price x quantity |
| Real GDP = | Nominal GDP (Price x quantity) ----------------- X 100 GDP deflator |
| Foreign exchange rate | |
| Calculate inflation rate | new price - old price of market basket ------------------------------------------------ X 100 old price of market basket |
| CPI limitations/biases | Substitution: (People buy more of cheaper good) Outlet: (More people shop at outlets than expected) New goods: (Prices start out high and then drop due to competition) Quality improvement: (Newer stuff may give more bang for buck than older stuff) |
| Base year CPI will always be | 100 |
| Total labor force | Employed (full & part-time) + Unemployed but job-seeking DOES NOT COUNT DISCOURAGED WORKERS |
| Why unemployment rate understated by BLS | Doesn't take into account underemployment (Part-time counted as full) or discouraged workers |
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