Econ unit 8 and 9 review

inflation

inflation

the rat of increase in prices over a given period of time, inflation is typically a broad measure, such as the overall increase in the cost of living in a country

2 ways to look at inflation

1. inflation rate: the percentage change in prices from year to year

2. price index: index number assigned to each year that shows how prices have changes relative to a specific base year

consumer price index

the most common measure of inflation for consumers in the consumer price index. Monitors price changes in a rep’s shopping basket of consumers products. includes quantities in a shopping basket determined in a base year and compares prices in the current year with those in the base year

GDP (gross domestic product)

commonly used measure of a country’s output. GDP only measures the final value if an economies goods and services. GDP is the total dollar value of all final goods and services produced in an economy during a particular period. it can be calculates using two approaches: income and expenditure

the income approach

4 classes of income (wages and salaries, corporate profits, interest income, proprietors income and rents)

the expenditure approach

sum of purchases in the product markets, excluding financial exchanges and second-hand purchasing (consumption, investment, government spending, net exports)

income

money received, especially on a regular basis, for work or through investment

labour force population

includes all Canadians 15 years or older with specific exclusions

labour force

includes all those who have a job, or are actively seeking employment

participation rat

percentage of the labour force population that make up the labour force

official unemployment rate

the number of unemployed people in the labour force as a percentage of the entire labour force. 4 type of unemployment: frictional, cyclical, seasonal, structural)

frictional unemployment

temporarily in between jobs

cyclical unemployment

fluctuations in output and spending (based on demand)

seasonal unemployment

seasonal nature of some jobs and industry’s (farming)

structural unemployment

mismatch between people and jobs. direct result in structural changes in the economy. As the canadian economy evolves, some industries grow, while others decline (technological, replacement, geographical)

technological unemployment

caused by the replacement of workers with the technology with capital-intense methods

replacement unemployment

caused by the movement of firms with the labour-intensive production to foreign counties in which labour rates are lower

geographical unemployment

created in specific geographical regions of a country due to a weak economy in an area that is overly reliant on half struggling industries. caused when the skills and location of available workers do not match

increased GDP

real GDP is interpreted as a sign that the economy is doing well. When real GDP us growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets

decreased GDP

then the economy is shrinking- bad news for businesses and workers. If GDP falls for two quarters in a row, that is known as a recession, which can mean pay freezes and lost jobs

increased inflation

reduces the purchasing power of consumers since a fixed amount of money will afford progressively less consumption

decreased inflation

consumers delay making purchases if they can, anticipating lower prices in the future

labour force participation

an important component of economic growth: as more people participates in the labour force, firms are able to expand employment and increase production

nominal GDP

is expressed in current dollars