econ gdp, enployment,

c + i + g + (x-m)

gdp formula

inflation can distort any economic variable so we have two versions of gdp

nominal and real gdp

nominal gdp

values output using current prices, not corrected for inflation

real gdp

values output using a constant price, base year is used to inflation rate

nominal gdp calculations

P x Q

real gdp calculations

using base P x new Q

gdp deflator

measure of overall level of prices, calculates inflation using gdp

gdp deflator formula

100 x nominal gdp / real gdp

outout growth, percent change formula

100 x year 2- year 1 / year 1

consumer price index CPI

measures typical urban consumer cost of living, bureau of labor statistics

inflation

rising overall price level

deflation

overall falling price level

disinflation

the process of bringing inflation rate down

5 steps to calculate CPI

1. fix the basket, determine what things consumers spend money on

2. find prices

3. calculate baskets cost, price x quantity

4. chose base year, base year will always be 100

5. compute inflation rate

CPI formula

100 x cost of basket in current year/cost of basket in base year

inflation formula

cpi this year - cpi last year / cpi last year x 100

GDP deflator vs CPI

gdp:

• looks at prices of domestic goods

• compares prices of goods currently produced

CPI:

• covers all customers

• compares prices of fixed basket over time

real gdp per capita…

is the main indicator of the average persons standard of livign

real gdp per capita formula

real gdp/population

nominal interest rate

not corrected for inflation, rate of growth in the dollar value of a deposit or debt, published interest rate

real interest rate

corrected for inflation, rate of growth in the purchasing power of a deposite or debt

how is unemployment measured

collected by bureau of labor statistics in us dept of labor, based on ppl 16 and up

BLS divides population into 3 categories

• employed: noninstitutionalized ppl aged 16 and up, full time and part time

• unemployed: noninstitutionalized ppl aged 16 and up wanting to work, includes seasonal workers

• not in the labor force: ppl not in first two categories

not in the labor force

noninstitutionalized ppl aged 16 and up who are not employed or seeking work, includes stay at home parents, full time students, younger than 16, disabled

ppl not in first two categories

unemployed

noninstitutionalized ppl aged 16 and up wanting to work, includes seasonal workers

employed

noninstitutionalized (not in prison, army, hospital) ppl aged 16 and up, full time and part time

labor force consists of people who are

employed and unemployed

unemployment rate formula “u rate”

100 * # of unemployed/labor force

labor force participation rate

100 * labor force/adult population

why the unemployment rate doesnt measure correctly

• no distinguish between full time or part time, or ppl working part time bc full time is unavailable, underemployment

• misreporting

• excludes discouraged workers, ppl who left labor force bc they cannot find a job that matched their skill level

discourgaed workers

ppl who left labor force bc they cannot find a job that matched their skill level

discouraged workers formula

total population- (LF+nLF)

real U6 rate

100 * # of discouraged workers/total population

underemployment

when full time jobs are unavailible

three reaosn why ppl are unemployed

• frictional unemployment: someone searchign for jobs that best suit their skills and tastes, short term

• cyclical unemployment: connected to business cycle

• structural unemployment: when workers lack skills, too many people seeking jobs, longer term

structural unemployment

when workers lack skills, too many people seeking jobs, longer term

cyclical unemployment

connecteed to business cycle

frictional unemployment

• someone searchign for jobs that best suit their skills and tastes, jobs are abundant when thsi takes place bc there are avilible jobs

unemployment insurance

a govt program that protects workers incomes when they are laid off