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Gross National Product
Total market value of all final and legal goods and services produced by all citizens no matter where the production occurs in one year.
Net National Product
GNP minus Depreciation.
Gross Domestic Product
Nominal GDP is the total market value of all final and legal goods and services produced within the country in one year.
Nominal GDP
Based on the current price of all products and services; grows with inflation, even if there is no growth in production.
Real GDP
Based on an agreed upon year’s constant dollars; adjusted for inflation.
Formula: (nominal GDP)/(price index)
Per Capita GDP
Real GDP per person.
Formula: (real GDP)/(population)
Limitations of and exclusions from GDP analysis
Doesn’t measure a nation’s “happiness”
Doesn’t count unpaid work or goods (e.g. housework, volunteer work, etc.)
Doesn’t count leisure time or psychic income
Doesn’t count social or environmental costs
Underground economy doesn’t count (e.g. black market, any other legal activities)
Unemployment rate formula
((number of people unemployed)/(total labor force))(100)
Employed
People who have a job, either full or part time.
Unemployed
Actively looking for work in the past 30 days, eligible to work, but haven’t found a job.
Labor force
Total of employed and unemployed people aged 16 and up; does not count full time students, retired workers, discouraged workers, etc.
Formula: ((total labor force)/(total population age 16 or older))(100)
Discouraged
People capable of working, but have given up looking for a job.
Unemployment rate goal
5% or less.
Causes of unemployment - frictional
Unemployed due to the time it takes to find a job or one who makes a choice to leave a job.
Causes of unemployment - structural
Unemployed do to a worker lacking the skills required for a job; someone or something replaces the worker.
Causes of unemployment - cyclical
Unemployed due to a recession (all the unemployment above 5%).
Costs of unemployment
Less gods and services sold
Government earns less income tax revenue
Unemployment tends to impact younger, unskilled, uneducated and minorities more
Costs of unemployment benefits
Increase in poverty (which could lead to potentially higher incidences of crime)
Loss of morale
Inflation
A general increase in price levels.
Goal is to have the inflation rate be 4% or less.
Those hurt by inflation
Those whose wages increase by less than the inflation rate
Those on fixed incomes
Savers
Money Lenders (that’s why banks charge interest!)
Those helped by inflation
Borrowers
Those with flexible incomes
Real rate of interest
The rate of profit that the financial institutions want to make when a borrower borrows money.
Nominal rate of interest
The rate at which financial institutions actually charge borrowers to borrow money.
Formula: nominal rate = real rate + inflation rate
Inflation rate formula based on the consumer price index
((price of selected items in the current year)/(price of selected items in the base year))(100)
(specifically) inflation rate formula
((CPI (current year) - CPI (last year))/CPI (last year))(100)
Note 
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