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what does GDP NOT account for?
used/second hand products, purely financed transactions (grants/transfer payments), services provided for no money, foreign produced goods and services
what does GDP account for?
Personal consumption expenditures (C), Gross Private Domestic Investment in Business (I), Government Purchases (G), Net Exports (Xn)
frictional unemployment
due to time workers spend in job search
structural unemployment
results when there are more people seeking jobs in a labor market than there are jobs available; no desirable skills.
cyclical unemployment
follows the business cycle, happens during recessions
seasonal unemployment
occurs by season, is temporary
nominal gdp
current year price x current year quantity
real gdp
base year price x current year quantity
economic growth
(new real gdp - old real gdp / old real gdp) x 100
rate of inflation
(new - old / old) x 100
gdp deflator
(nominal gdp / real gdp) x 100
natural rate of unemployment
frictional + structural
actual rate of unemployment
natural + cyclical
real wages/income/interest rate
nominal - inflation
who is helped by inflation?
borrowers
price index
(Basket of Given Year/ Basket of Base Year) x 100
Xn
exp - imp
real gdp
(nominal gdp / aggregate PI) x 100
nominal gdp
real gdp x (aggregate PI/100)