Unemployment, Inflation and Economic Growth - simplified

Gross domestic product

The sum total of the value of all goods and services produced within a country in a given year
(better at measuring the size and growth of an economy)

Seasonal unemployment

happens when seasonal variations provide fluctuations in job market
Ex. agriculture, housing, summer, holiday

What GDP doesn't measure

1. goods and services that people make or do themselves
2. The people who choose not to record or report large amounts of production and income to the government (black market and gambling)
3. negative result of smoke and police into the air
4. Quality of life

Real GDP

GDP adjusted for inflation - Expressed in constant, or unchanging, prices

Nominal GDP

GDP measured in current prices

Frictional unemployment

Unemployment that occurs when people take time to find a job (between jobs but able to be employed quickly)
Ex. people are laid off, change jobs, need time to find right position after college

structural unemployment

occurs when quantity demanded of a labor force is less than quantity supplied of laborers - skills do big math have those needed for the job
Ex. downsized or technology innovations

Cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves (inadequate aggregate demand)
Ex. Great Depression, Recession

Recession

nations total output of goods and services is down for two quarters

Depression

Nations total output of goods and services is down for an extended period of time

Unemployment rate

# of unemployed/size of labor force

Labor force

men and women 16 years old and over who are either working or actively looking for a job

Aggregate demand

The amount of goods and services in the economy that will be purchased at all possible price levels

Inflation

an increase in the average level of prices not a change in any specific price

Deflation

A decrease in the general level of prices.

Demand - pull inflation

Prices rise as a result of increased demand for products

Cost - push inflation

- prices rise as a result of increased cost of production
- dangerous for economy because triggers downward spiral
- Ex. land labor Raw materials construction etc.

Consumer price index

Measures increase/decrease in price of goods