Unit 2; Day 5

Unemployment- Failure to use available resources, particularly labor, to produce desired goods and services

Labor Force-
Employed+Unemployed
Above 16 yrs
Able, Willing to work
Not in Labor Force-
Military
Students
Retired
Disabled
Homemakers
Mental Institutions
Jail/Prison
Those who are not looking for a job

Unemployment rate- 4-5%= Full Employment/ Natural Rate of unemployment (NRU)
(# Unemployed)/ ((Employed) +(# Unemployed) ) x100
Unemployment Types
Frictional Unemployment- Searching for a job/ Temporarily unemployed/ In between jobs.  Have transferable skills  eg. Better opportunity or graduate
Structural-  Changes in structure of labor force which makes some skills/jobs obsolete. Do not have transferable skills
Seasonal- Depends on time of near, nature of job. eg. school bus drivers, life guards
Cyclical- Results from economic downturns such as a recession. As demands for goods fall, demand for labor also falls and workers are laid off.
 Frictional+Structural= NRU
Full Employment means there is no cyclical unemployment

GDP gap -amount of which actual gdp falls short of potential gdp

Okun's law- for every one percent in which actual unemployment rate exceeds the NRU, a GDP gap of about 2 percent exists
ex. In 2012, the unemployment rate was 7.6 percent. The NRU was 6 percent.

Rule of 70- is used to determine how many years it takes for a value to double given a particular growth rate.

ex. If 20,000 in bank, and it earns yearly interest of 7 percent how many years will it take for income to double? 70/ 7 = 10 years.

Unit 2; Day 4

Inflation= (Price index in yr 2 - price index yr 1)/ price index in yr 1 *100
What is Inflation? Video
Nominal Interest Rate- % increase in money the borrower must pay the lender for a loan. Not adjusted for inflation. =(Expected Interest Rate + Inflation Premium)
>Anticipated Inflation
>Fisher Effect
Real Interest Rate- % increase in purchasing power the bower must pay the lender for a loan. Adjusted for inflation. =(Nominal Interest rate- Inflation)

Hurt By inflation
Savers
Creditors/ Lenders
Those on a fixed income( Elderly, Welfare, Medicare, Medicaid, Social Security)
Helped By Inflation
Debtors

COLA- Cost of living Adjustment. Gives automatic wage increases when inflation occurs. Cali+NY get adjustment due standard of living.
Video:

Unit 2, Day 3

Nominal GDP- Value of output produced in current prices. Can increase from yr to yr if either output or prices increase Total Q*P

Real GDP- Value of output produces in constant or base year prices. Adjusted for inflation. Can increase year to year only if output increases. P*Q= Real GDP. If we want to measure economic growth, we will use Real GDP.
If we want to measure increase in prices(inflation) we will use nominal GDP

	Quantity in 2015	Quantity in 2016	Price in 2015	Price in 2016
Pizzas	5	6	$10	$15
CD	4	5	$15	$20
Stereo	2	4	$610	$550
Automobile	1	1	$10,000	$12,000

Nominal GDP: 5*10=50 

4*15=60

2*610=1220

1*10,000= 10,000 Total= 11,310 = Nominal GDP in 2015= Real GDP 2015

Nominal GDP 2016: 14,390

Real GDP 2016= Quantity 2016* Price 2015= 12,535

GDP Deflator-  Price index used to adjust from nominal to real. (Nominal GDP/Real GDP) *100

In the base year, the GDP deflator will always equal 100. For years after the base year, the GDP deflator is greater than 100. Years before base year, GDP is less than 100.

Consumer Price Index(CPI)- Most commonly used measurement for inflation. Measures the cost of a market basket of goods for a typical urban american family. 

(Cost of a market basket of goods in a given yr)/ (cost of market basket of goods in base year) * 100

Unit 2, Day 3

Ways to Calculate GDP-
Expenditure Approach- Add up all spending on final goods/Services produced in given yr.
C+Ig+G+Xn
Income Approach- Add up all income that resulted from selling all final goods and services provided in a given year.
GDP=W+R+I+P+Statistical Adjustments
Statistical Adjustments- Indirect business taxes, depreciation(Consumption of fixed capital), Net foreign factor payment

National Income- Add All
Compensation of Employees- include wages salaries, fringe benefits, social security contrib., health, pension plans
Rents- Income of property owners
Interest- Income that is paid by someone to the owner of a loan
Corporate Profits- Income of stockholders in a corporation
Proprietor's Income- income of sole proprietor or partnership
Or GDP-Indirect Business Taxes-Depreciation- Net foreign Factor

Budget Surplus/Deficit- Govt purchases+ Transfer payments -Gov tax fee collection.
If positive= Deficit; If negative, Surplus
Trade Surplus- Exports- Imports
Positive= Surplus, Negative= Deficit
Disposable Personal Income-
National income- Personal Household Taxes+ Government Transfer Payments
Net Domestic Product(NDP)= GDP-Depreciation
Net National Product(NNP)= GNP- Depreciation
GNP=GDP+Net foreign factor payment

Unit 2; Day 2

GDP- the market value of all final goods and services produced within a ration in a given year
What’s not included in GDP- 
Intermediate goods-a good that required further processing before purchase
Used or handmade goods
purely financial transactions(stocks and goods)
Unreported business activity
Illegal activity
Nonmarket activity eg. Volunteering, babysitting, anything you perform for yourself, producing your own source of labor,
        Transfer payments: Public(Social security, VA, welfare) + Private(Scholarships)
International GNP
What’s included in GDP-
 C- 65% Personal Consumption Expenditures, wages
IG- 17% Gross private domestic Investment: New fact. equip., Fact. equip. maint., construction of housing, unsold inventory of products build in a year
G-  20% Government Spending
Xn- -2% Net Exports (Exports- Imports)

Unit 2; Day 1

Circular Flow diagram- reps transactions in an economy

Product Market- Place where goods and services are produced by businesses

Factor market- place where households sell resources and businesses buy resources. Firms purchase/rent land and hire workers

Firms-organization that produces goods and services for sale

Household- Person/group that share income

WRIP- Wages, Rent, Interest, Profit