Macroeconomics Test #2

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Unemployment –
a person must have a legal age capable of working actively looking for a job, willing to wokr and does not have a job
The different groups and what counts and does’nt count:
Unemployment, Employment > 50-60%

Homemaker the rest are neither employed or unemployed
In Jail 50-60%
Sick and Disable
In Hospital
In School/ College
Under 16
Discouraged Workers

Labor force participation rate =
Labor force/ population X 100
The 6 Types of Unemployment
1) Frictional unemployment
2) Structural unemployment
3) Cyclical unemployment
4) Seasonal unemployment
5) part time (can be unemployed or employed)
6) under employment (can be unemployed or employed)
1) Frictional Unemployment –
seeking short employment, looking for a job first time, quitting a job and getting a new one (also known as search unemployment, wait unemployment, between the job)
2) Structural Unemployment –
because of the changes in technology, and orgainzation, (someone laid off for making VHS and then goes to school to learn how to make DVDS) (mismatch) qualification of an employ and new job needs.
3) Cyclical unemployment –
causes because of the ups and downs in the economy. when economy sucks, jobs suck
4) Seasonal unemployment –
( ice cream place only hires during the summer but not in the winter )
5) part-time ??
6) under employed –
( a man with a PHD working at McDonalds) over qualified for the job
What are the main unemployments?
1) Frictional, 2)Structural & 3)Cyclical
What is natural unemployment?
Frictional/Structural, can’t ever be gone, will always exist
Rate of unemployment =
unemployed/ labor force X 100
Rate of natural unemployment =
(frictional unemployment+structural unemployment)/ labor force X 100
Current –
is 1% ^ in unemployment, reduces GDP by 2%
all final goods and services produced in an economy/country in a year and calculated at current market prices, the FINAL. (not fertalizer, the vegitables or what the fertalizer is used for is the final/GDP product)
What does the GDP stand for?
gross = total, domestic = within the country, product = goods and services
Intermediate product –
not included in the GDP (fertalizer)
GDP is also..
Output + Prices of the same year
GDP + intermediate =
Value – added matter
GNP (gross national product) –
national, does not matter where, but who in the nation. (Ford cars produced in India is the GNP, for Fords produced in America it would be the GDP) (Honda that produces in Ohio, to Japan it is GNP)
The two calculations/ measurment of GDP
1) expenditure *****
2) income method
Expenditure approach equation …
GDP = C + Ig + G + (X – M)
C =
Personal income
Ig =
gross private domestic investment expenditure
Net Ig= gross private – (consumption of fixed goods)
G =
government expenditures (HCC supplies)
X & M =
X = Export
M = Import
Depreciation –
(consumption of FIXED CAPITAL)
Norminal GDP –
current year output calculated at current year prices, increase in both prices and output.
Real GDP –
output of the year, calculated at the base year prices, using price from the base/ only increase in output, not prices.
What is the order of GDP?
GDP > NDP > NI > PI > DI *know back and forth*
Examples of GDP…
Ex. Someone who writes someone a check is not increasing GDP because there is no product/service
Ex. transfer of funds is not counted in GDP
Ex. selling a car that was made in 2003 and then selling after some time of ownership, it is then double counted because it has already been counted in the GDP
Ex. drugs do not count in GDP
Ex. perosnal enjoyment does not count in GDP, along with homemakers
inflation –
general increase in price level from ONE YEAR, into the next. (the changes from 2007 into 2008 of something) / increase in price fromt he one time period to the next / does not effect everyone
The 3 different effects of inflation
1) price effect
2) income effect
3) wealth efffect
Price effect –
if tuition went up from one year to the next and you recieved the same spending money, you would have less to be able to spend because of the increase in just tuition alone
Wealth effect –
value of your savings has declined because wealth/prices have increased (save up 100 dollars to buy shoes but then you decided to save so that next year you will have 105 from savings and go to buy shoes, but find out the price went up to 110, so you dont even have enough now)
income effect –
nominal income & real income
nominal income –
the income you recieve in terms of dollar amount
real income –
how much the money you recieve is worth, adjusted to price rise
Demand-Pull inflation –
due to increase in demand, prices are boung to increase(inflation), few goods changed by many
Cost-Push inflation
less supply, higher price
When demand goes up…
price goes up
COLA stands for..
Cost Of Living Adjustment
What is COLA?
causes increase to nominal income but not real
(COLA) Bracket creep –
bracket to higher bracket because his income went up and he is now losing more. PRICE^ MARKET PRICE^
What does ARM stand for?
Adjustible Rate of Morgage
What does ARM mean?
reduces immediate payment (sons apartment for only 5 first few years), if long lasting it can kick you in the but
Consumer Price Index –
increase in overall prices from the base year CPI(100)
Calculations for CPI that will = to 100
A Fixed size of the basket.
– items in the basket
– units of items in the basket
– prices of items
– multiply prices with units of items
total = 100
to calculate CPI, you always need the..
base year
to calculate rate of inflation, you do NOT need…
base year
what three unemployments = to unemployment
cyclical, frictional, structural
Categories: Macroeconomics