Unemployment

Unemployment- % of people who do not have jobs but are in the labor force

• Labor force- the number of people  employed + # of people unemployed

People who are excluded from the labor force

• Kids
• military personal
• Mentally insane
• locked up
• stay at home parents
• full time student
• retired people
• Discouraged workers

employed vs unemployed

• Employed : people 16 and older who have a job
• Unemployed : people 16 or older and have actually looked for a job for two weeks
• Unemployment rate: # of unemployed/labor force x 100

Types of unemployment
1.seasonal- mall Santa, life guard
2.Frictional-between jobs,leaving one job for someting bigger and better
3.strucural unemployment-lack of skill or declining industrys
4.cyclical -bad for soceity and individuals ( reccesion)

 Full employment-occurs when  there is no cyclical unemployment
okuns law- every one percent in unemployment over the NRU there is a 2 percent decline in real gdp
Rule of 70- 70 / rate of change

Introduction to inflation

consumer price index
 Measures the market basket of goods for a typical american family
Formula: cost of market basket in a year/cost of market basket in a base year
 x 100.

• Real GDP is adjusted for inflation
• Inflation -general rise of a price level
• Deflation general fall of the price level

Rate of inflation
CPI2-CPI1/CPI1 x 100
 New minus old over old

Types of inflations

• cost push inflation- higher production of cost which increase prices
• demand pull inflation-too many dollars chasing too few goods
• political panics- recession or depression

Inflation help

• Debtors

Inflation hurt

• lenders
• savers
• people with fixed wages

Nominal vs Real GDP

Nominal GDP- value of output produced in current prices
(can increase year to year )

• Formula : P x Q. Of the current year.
• used to find inflation

Real GDP- value of output produced in base year price

• real GDP can increase only if output increase.
• Formual : P x Q. Price of the base year times the quantity of the current year.

Ex: Determine nominal GDP

 Year 1 (Base year) 10 computers sold at $2000 ach and 15 tv sold at $500 dollars each. Year 4 17 computer sold @ $2,200 each and 20 tv sold @$550 each.

                        Computers                         Tv

year 1           10@$2000                     15@ $500

                      total: $20,000                  Total 7,500

Year 2         17@ 2,200                      20@ 550

                         =$37,400                   = $11,000

Answers : Real GDP for year 4 =$4400

Nominal for year 4= $48,400

 

Nominal vs real Gdp video

GDP Deflator

• Base year GDP is always 100
• Years before the base year its less than 100
• years after the base years the deflator is more than 100

GDP

GDP formulas

GNP- (Gross national product)- Total value of all final  goods and services produced by Americans in a given year.

Expenditure approach ( Goods and services)

• GDP= C+IG+G+XN
• C- personal consumption ( final goods and services)
• Ig- Gross private domestic investment (inventory)
• G- government spending
• Xn- ( net exports- net imports)

Income approach (factors of productions)

• GDP=W+R+I+P+Statistical adjustments
•  W- wages (salaries/compensations)
• R-Rents (rental income)
• I-interest (interest income)
• P-Proprietors income
• Statistical adjustments- To match expenditure approach

Budget deficit-total amount that the government borrows with in a year

• Transfer payments+govt purchase of goods and services- government tax and fee collection
• Deficit +         surplus-

Trade
Exports-imports

• Deficit -     surplus +

National income
NI=compensation of employees+proprietors income+rental income+interest income+corporation profit

Or

                          NI= GDP-indirect business tax-depreciation-net foreign factor

Disposable income

DPI=NI-household taxes (personal taxes)+Government transfer payment

Net domestic product

NDP=GDP-Depreciation

Net national product

NNP=GNP-Depreciation

Gross National Product

GDP-Net foreign factor payment

Introduction to GDP

Gross domestic product (GDP)- total value of all goods and services produced within a country borders with in a given year. and all production an income earned.
 - production needs to be finished on american soil.

Elements included in GDP

• Final goods and services
• Income earned (W.R.I.P) -wages ,rent ,income, proprietors 
• Interest payment on corporate bonds 
• Current production of final goods and services
• Unsold output (inventory)

Elements excluded in GDP

• Intermediate good- if included can cause double counting
• Transfer payments (public on private)                                                                                                 -Scholarships                                                                                                                                     -social security
• purchase of stocks and bonds
• None market transactions                                                                                                                       - Babysitting                                                                                                                                      - illegal drugs

 Here is a video to explain more

Circle flow diagram

                                        Here is a video to help with the circular Flow model
                                     
                                                           

   

circular flow

Circular flow model represents the flow of money ,Goods and services.

• Factor market (resources)- Market where factors of production are bought and sold.
• Product market ( goods)- where goods and services are bought and sold

1. households- a person or a group that share income
2. Firm-organization that produces goods and services for sell.

Types of Markets

• Traditional economic system in which decisions are made upon belief,customs and religion. Ex: most places in Africa
• Communist: economy is under the governments control: the government answers all questions about the economy. Ex: Cuba
•  Mixed economy: mixed some government involvement with the economy and private. Ex: USA