Unit 5: Economic Indicators

What is the equation to find unemployment rate?

(#unemployed/CLF) • 100

To find inflation rate, we use the equation:

(CPI in the later year- CPI in the earlier year/ CPI in the earlier year) •100

To create a price index you will need three things:

A base year - a year again switch all other years will be compared. A market basket of goods and services that are represented of the purchases that are made with in a year. The price and quantity of each item in the basket

What is the rule of unemployment?

A person must be out of work for at least one week to be considered unemployed.

One useful tool when looking at a population is what?

A population pyramid - it is a bar graph showing populations by age and gender

What does acute shortage of goods and services mean?

Acute mean severe. In a depression you will notice shortage of goods and services all over the economy

Depressions are characterized by three things:

Acute shortage of goods and services, high rates of unemployment,idle resources

These reoccurring ups and downs in GDP are known as what?

Business cycle

What are four things that can cause changes in real GDP?

Business expectations of the future, innovation and imitation, changes in savings and spending, external factors can affect the business cycle.

How do we find GDP?

By multiplying the quantity of all goods and services made this year by their respective prices.

What is the equation for CLF - civilian labor force?

CLF= # of employed people + # of unemployed people

When did the most significant change in population in the US I happen?

During the baby boom - 1946 to 1964

What does a high rate of unemployment mean?

During the great depression, unemployment rose as high as 25%. In the United States during normal times our appointment tends to be 4% and 5%.

Tammy drives her kids to school

Excluded - nonmarket transaction

Lucy builds a vacuum at a yard sale

Excluded - secondhand sale

Milk purchased by Beth for her kids

Final

Paper purchased by Jack for his printer

Final

Scissors purchased by great clips for their haircuts

Final

What are the three main economic indicators?

GDP, inflation, and unemployment.

If GDP has not been adjusted for inflation, it will be called:

GDP, nominal GDP, current GDP

What is the output expenditure model?

GDP= C+I+G+(X-M)

Explain businesses expectations of the future

If businesses expect the future to be good, they will purchase materials and make products now this will cause GDP to increase. Eventually, the market is full of the product so they will begin to reduce their production to avoid a surplus. As they slow production, real GDP decreases

What is full employment?

If our unemployment rate is below 5% we would consider ourselves to be at this type of employment. It is an indication that our economy is strong.

Explain changes and saving and spending

If people are saving, they are not buying stuff. If consumers aren't buying stuff, businesses won't make as much stuff. This causes real GDP to decrease. If people are spending then this gives businesses an incentive to produce more, so real GDP increases.

John buys a TV made in Japan

Included (NX)

The government buys 100 jeeps for the army

Included G

Milk purchased by Hershey's for their chocolate bars

Intermediate

What are some things that are excluded from GDP?

Intermediate Goods Transfer payments Secondhand sales Financial assets Underground economies Non-market transactions

What is the variable C?

Is the consumer sector a.k.a. consumer spending. It includes goods sold to consumers and services done for consumers.

What is secondhand sales?

Is the sale of use good. Use goods were counted in GDP the year they were first made/purchased. We do not count them when they are re-sold because no new wealth was created.

When does the recession begin at?

It begins at a peak - maximum point. A peek is where real GDP stops increase in and starts decreasing.

Where does a recession end at?

It ends at a trough - minimum point a trough is where real GDP stops a decrease in and starts increasing again

What is the civilian labor force?

It is a group of people who are non-military, non-institutionalized, and 16 years of age or older

What is gross domestic product?

It is a measure of growth. All final goods and services produced in a year within a nations borders.

What is stagflation?

It is a period of stagnant growth and inflation. It is characterized by declining GDP but increasing price level.

What is gross national product?

It is all goods and services made in a single year produced by a nation's companies.

What is inflation?

It is an increase in the price level. Items often become more expensive overtime.

What is the most common price index?

It is consumer price index.

When is a real GDP increasing?

It is in the other phase of the business cycle called recovery - expansion

What is the variable I?

It is investment sector-business spending. It includes money spent on commercial/business structures in buildings. Purchases on machines, tools, resources. Homes

What is financial assets?

It is known as money making money. For example the purchase of Stocks or interest earned on a bank account.

What is one phase of the business cycle?

It is recession - contraction. This is when real GDP is decreasing. To be officially in a recession real GDP must decline for at least 2 quarters in a row - six months

What is the price level?

It is the general magnitude of prices in the economy. In other words, it's the average of the current price is for all goods and services in the economy

What is the variable G?

It is the government sector- government spending. It includes government purchases of goods and services.

What is disposable personal income?

It is the income all consumers have left after personal income taxes and deductions are taken out. So, we are together every Americans and that pay

What is personal income?

It is the money made by all consumers before personal income taxes and deductions are taken out. So we are together every American is gross pay to get one really big number.

What is the inflation rate?

It is the percent change in cpi?

What is non-market transactions?

It is things people do for themselves or for others for free.

What is an economic indicator?

It is things we measure to see how healthy the con of me is.

What is unemployed?

It is those who are actively seeking work but cannot find it. They have to be looking for a job

What is price indices?

It is to measure inflation.

What is cyclical unemployment?

It is unemployment that is related to the swings in the business cycle. If there is a recession and sales are low, this Unemployment goes up. If there is an expansion in sales or high this employment goes down.

What is technological unemployment?

It is unemployment that occurs when the workers are replaced by machines. This is sometimes called automation.

What is structural unemployment?

It is unemployment that occurs when there is less demand for a worker and his skills. Usually this is permanent. The structure of the industry has changed and now the skills that some people possess or no longer useful.

What is frictional unemployment?

It is when a worker is between jobs or looking for his first job.

What does (X-M) stand for?

It stands for net exports and is the foreign sector. X stands for exports and M stands for imports

Inflationary periods tend to hurt who

Lenders and help borrow ours because loans are often paid back in inflated dollars.

Would clothes made by Nike in Mexico be counted in the United States GDP?

No

What is seasonal unemployment?

Occurs because of changes in the weather or in the seasonal demand for certain products. It takes place every year and is predictable.

Explain external factors that can affect the business cycle

Oil can affect the business cycle because it is used to make everything. If oil becomes more expensive, production slows in real GDP decreases. If oil becomes cheaper, production increases in real GDP increases. Wars cause increase and decrease in production. And other factors like natural disasters and changes in trade laws

We represent GDP by an equation known as what?

Output expenditure model

What kind of people are hurt by inflation?

People on fixed incomes. If someone's income stays fixed and prices rise all around them are going up, their money will not go as far. Also people engaged and contracts. Savers R hurt by inflation

What is a consequence of inflation?

Purchasing power - is how much a dollar will buy you.

If GDP has been adjusted for inflation, it will be called:

Real GDP, GDP in constant dollars, GDP in chained dollars

What are two types of structural unemployment?

Seasonal and technological

What happens every 10 years?

The bureau of census measures population and unemployment

What is net immigration?

The number of people who moved to the United States are added into the population. The number of people who moved out our subtracted from the population.

What is intermediate goods?

They are finished goods used to make other goods already counted in GDP. It's another way of saying capital goods.

How are customers in a contract feel about inflation?

They are happy because they are helped by inflation.

What is underground economy's?

They are illegal activities sometimes we call these black markets. We exclude this from GDP for two reasons - they are illegal and it is impossible to measure accurately how much illegal wealth is created.

Every month of the Bureau of the Census polls 50,000 households to gauge the level of what?

Unemployment

What happens if GDP decreases?

We are making less stuff. If we're making less stuff we won't need as much labor so unemployment goes up and we tend to be worse off

What happens if GDP increases?

We are making more stuff. The more stuff we make, the more jobs there are and the better off we are

When is there a decrease in the general price level?

When deflation is happening

Explain innovation and imitation

Will a company comes up with a new and innovative idea, they will increase production to try to profit off the idea before their competitors can copy it. Eventually competitors do you flood the market with similar products in an effort to obtain some of them market. Both situations can cause GDP to increase.

Would a Japanese car made in Kentucky be counted in the United States gross domestic product?

Yes

Would clothes made by Nike in Mexico be counted in Mexico is GDP?

Yes

What are the different types of unemployment?

frictional, structural, cyclical

What is idle resources mean?

means not working or not be in use. During the depression, we have resources available but we're not making anything with them. Businesses are scared to make their products because they are worried people won't have the money to buy them.