Chapter 5: Measuring GDP, Employment, and Unemployment

Flashcards covering key vocabulary for measuring GDP, employment, and unemployment, including GDP transactions, expenditure components, nominal vs. real GDP, and employment classification.

Government salaries and GDP

Increase GDP (counts as newly produced services).

Social Security payments and GDP

No change in GDP (classified as a transfer payment).

Purchase of new airplane parts and GDP

GDP increases (counts as newly produced goods).

Oil purchased from abroad (by government) and GDP

No change in GDP (government purchase offset by imports).

Buying a new U.S. car by a consumer and GDP

GDP increases; consumption rises.

Buying an imported car by a consumer and GDP

GDP does not change; consumption rises while net exports decrease.

Rental business buying a new U.S. car and GDP

GDP increases; investment rises.

Nominal GDP

GDP measured using current market prices for production in a given year (e.g., $8,625 in 2026).

Real GDP

GDP adjusted for inflation, measured using constant prices from a base year (e.g., $7,825 in 2023 prices).

Unemployment rate

The percentage of the labor force that is unemployed (e.g., 5%).

Labor Force Participation Rate (LFPR)

The percentage of the adult population that is in the labor force (employed + unemployed, e.g., 70%).

Unemployed classification

Individuals who are able and available to work, and have actively looked for work in the past four weeks (e.g., laid-off worker looking, new grad job seeker, banker quitting and job searching).

Employed classification

Individuals who are working for pay, even if on vacation (e.g., tech on vacation) or part-time (even if wanting full-time).

Not in the Labor Force classification

Individuals who are neither employed nor unemployed (e.g., 14-year-old worker, stay-at-home parent, discouraged worker).

Discouraged worker

An individual who would like to work but has given up actively looking for a job; not counted in the labor force.

Consumption (C)

Household spending on goods and services, a component of GDP (e.g., $550).

Investment (I)

Spending on new capital goods, inventories, and structures, a component of GDP (e.g., $175).

Government Purchases (G)

Spending by local, state, and federal governments on goods and services, a component of GDP (e.g., $200).

Net Exports (NX)

The value of a country's exports minus the value of its imports, a component of GDP (e.g., -$50).

Inventory Investment

The value of goods produced but not yet sold, counted as part of investment in GDP (e.g., 100k unsold computers at $0.2B).

Part-time worker wanting full-time

Counted as employed, although informally considered 'underemployed'.

Buying old car and GDP

No change in GDP (not a newly produced good or service).

Intermediate goods and GDP

No change in GDP; their value is embedded in final products.

Landscaping service and GDP

GDP increases (a newly produced service).

GDP Accounting Principle

Only newly produced final goods and services count toward GDP.