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Econ ch. 7&8

GDP, inflation, unemployment

TermDefinition
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
Created by: 1763
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