econ midterm 3

gdp

total value of good and sercives produced in country in 1 yr.

not in GDP - used good, unpaid labor, illegal trade

sumation(price*quanitty)

types of unemployment

frictional - btwn jobs, voluntarily

structural - moving/skill obsolete

cyclical- recession related

seasonal- ie farmers

rate of inflation using CPI

((new index-old)/old index)*100

real vs nominal gdp

real = fixed for inflation, price is a constant, reflect output compared to other years

nominal = current prices, increase due to higher prices or increased output

change in real GDP

((new gdp)-(old gdp))/(old gdp))*100

unemployment/ unemployment rate

no job, lookinig for work

unemployment rate = (number of unemployed/labor force)*100

inflation key concepts

inflation - increase prices

hyperinflation - super increase price

deflation - price down

disinflation - rising prices but falling inflation rate

sagflation: recession (stagnation) + high inflation

CPI (Consumer Price Index)

tries to capture an average of prices paid by consumers for good and services

issues -

• substitution bias - doesn’t capture substation away from things that relatively more expensive

• quality bias- doesn’t capture new stuff or improved quality of stuff

business cycles

recession - real gdp decreases - contraction

recovery - real gdp increases - expantition

trough - low point of gdp in cycle

peak - high point

unemployment rate and labor force participation

unemployment - # unemployed / # in labor force

labor force participation rate - # in labor force / population 16+ yro

sticky wages

sticky downward - ez to increase hard to decrease wage

falling labor = less employment, wage doesnt change

inflation in prices vs wages

real wages can be eroded by inflation

etc idk add more

real vs nominal interest rates

real intrest rate r = nominal intrestrate i - inflation rate

aggregate production function - depends on captial, labor, natural resources and knowedgle

output = F(K, L, NR, knowledge)

output/L = A*F(K/L,NR/L)

knowledge = residual growth

labor productivity - output per worker/ worker-hour

capital productivity - output per dollar of capital

total factor productitivty (TFP) - extra producticity

sources of growth/TFP total factor pdoducrivity

growth- more inputs, more inputs per worker,

tfp(knowledge)- edu, science, physical and virtual infracturue, legal/finatial,

wellbeing

happiness, human dev index- life expect, education, standard of living