AP Macroeconomics: GDP & Unemployment

For all countries, what are the three major economic goals?

1. Promote growth

2. Limit unemployment

3. Keep prices stable (limit inflation)

Gross Domestic Product (GDP):

The dollar value of all FINAL goods and services produced within a countries borders in one year

GDP measures how well a country is doing ____________

Financially

Percent change in GDP equasion:

New-Old/New x100

What does GDP per capita measure?

Best measure of a countries standard of living; measures GDP per person

Why do some countries have higher GDP’s?

Different productivity

What is NOT included in GDP?

Intermediate goods, non-production transactions, non-market/illegal activities

Calculating GDP, expenditures approach equasion:

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

What is inflation?

A rise in the general level of prices

Nominal GDP measures…

Current prices and does not account for inflation

Real GDP measures…

For inflation

_____________ is the best measure of economic growth

Real GDP

Unemployment:

Workers who are actively looking for a job but arent working

Unemployment rate:

The percent of people in the labor force who want to work but are not working

Four qualifications for the labor force:

1. Must be 16

2. Able and willing to work

3. Not instutionalized

4. Not in military, full-time student or retired

Unemployment rate equasion:

Number unemployed/number in labor force x100

Three types of unemployment:

Frictional, structural, cyclical

Frictional unemployment:

Temporary unemployment/being in-between jobs; have transferable skills but not currently working

Structural unemployment:

When workers skills do not match jobs available; workers do not have transferable skills and jobs will not come back

Cyclical unemployment:

Caused by downturns in business cycle; during downturn, demand for goods/services falls, leading to demand for labor falling

___________ and ___________ unemployment are present at all times because people will always be between jobs or replaced by technology

Frictional/structural

The economy is doing ________ if there is only frictional and structural unemployment

Great

Natural Rate of Unemployment (NRU):

Frictional plus structural unemployment; the amount of unemployment that exists when the economy is healthy and growing

Full Employment Output (Y):

The real GDP created when there is no cyclical unemployment

Discouraged workers:

People who are not looking for a job because they have given up

Labor Force Participation Rate:

Percent of population in the labor force

Underemployed workers:

Someone who wants more hours but cannot get them; still considered employed

The overall unemployment rate doesnt show…

Disparities for minorities and teenagers