Econ Midterm pt. 2

Most Desired Outcome for Level of GDP

high level

Most Desired Outcome for Rate of Growth for GDP

positive growth (upward trend)

Most Desired Outcome for Price Levels

constant level (stable, no inflation- low rate of inflation acceptable)

Most Desired Outcome for Employment

full employment

Frictional employment

result of time involved in adjusting to changing labour force and employment opportunities [in between jobs]

Three indicators of economic growth

1. rate of growth of real national income

2. rate of inflation

3. rate of employment

Employment

number of adults (15 yrs or older) employed (working) full-time, part-time, or self-employed

Unemployment

not working but available for and seeking work (economic, social, psychological problem)

Labor Force

[Sub. set of Pop.] those who are employed and those who are not employed but actively looking for jobs

Actively looking for a Job

How long/ when was the last time you looked for a job?

Rate of unemployment equation

unemployed/labor force

Discouraged workers

Want to work but no longer look because they believe suitable work is not available

[not considered unemployment because you are not actively looking for jobs]

Demand/Supply Equations

Demand: P = 10-q

Supply: P = 1 + (1/2)q

Cyclical Unemployment

Observing GDP as it goes through cycles; captures cyclical nature of GDP expansion

Structural Unemployment

Caused by changes in economic structure relative to labor force characteristics

[mismatch of demand and supply labor pertaining to skills]

Expenditure Based GDP

Consumption + Investment expenditures + Government expenditures + (Exports - Imports)

[C + I + G (X - IM)]

GDP per Capita

Real GDP/ Pop.

GDP deflator [equation]

index of current final output prices relative to base year prices

GDP deflator = (Nominal GDP/Real GDP) x 100

Real GDP [equation]

The quantity of final goods and services produced by the economy in a specified period of time

[GDP (year)/ GDP deflator] x 100

Rate of growth of real GDP

Rate of growth of real GDP = [Real GDPyear 2 − Real GDPyear 1]× 100

Nominal GDP

the market value at current prices of all final goods and services

Price Index

a measure of the price level in one year compared with prices in a base year

Employment Rate

(employment/ population 15+ years) x 100

Unemployment rate

(labor force- employment/labor force) x 100

Calculating Real GDP

(nominal GDP/GDP deflator) x 100