Eco231 example 1

Unemployment Rate Formula

(Unemployment / Labor Force) × 100

Frictional Unemployment

Unemployment occurring when people are between jobs.

Structural Unemployment

Unemployment caused when workers' skills do not match the demand for goods and services.

Consumer Price Index (CPI)

Measures changes in the prices of goods and services and indicates inflation.

CPI Formula

(Current value of market basket/ base year value of market basket) × 100

Inflation Formula

(Year 2 CPI-Year 1 CPI/ Year 1 CPI) x100

Aggregate Expenditure Method

consumption + investment + government purchases + (exports - imports)

Nominal GDP

Total value of goods and services at current prices.

Real GDP

Total value of goods and services adjusted for inflation.

Aggregate Supply Curve

Shows the total output of goods and services that an economy can produce at different price levels.

Short-run Aggregate Supply (SRAS)

Shifts when resource prices, government policy, and productivity change.

Long-run Aggregate Supply (LRAS)

Shows how much a country can produce when everything is functioning at full capacity.

Aggregate Demand Curve

Shows the total amount of goods and services that people are willing to buy at different price levels.

Economic Growth

Increase in the value of goods and services produced by the economy over time.

Economic Self-Adjustment

The term for the economy fixing itself over time without government intervention.

Natural Output Level

The point at which resources are fully utilized, and the unemployment rate is at its natural rate.

Cyclical unemployment

Unemployment that rises and falls along with the business cycle.

National income method

GDP: wages + rent + Interest + Profit

Economic growth conditions

1. Rule of Law

2. Protections of Private Property rights Protected by (ule of law)

3. Incentives that Promote productivity