PowerPoint PresentationSlide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28Slide 29Slide 30Slide 31Slide 32Slide 33Slide 34Slide 35Slide 36Slide 37Slide 38Slide 39Slide 40Slide 41Slide 42Slide 43Slide 44measuring serves as a basis for setting reaching macro goalsthe creation of goods and servicesthe creation of goods and servicesSome prices may even be going down!!a general rise in the price levela general rise in the price levelour focus is on peoplea resource(factor of production)is not being useda resource(factor of production)is not being used1. Loss of goods and services1. Loss of goods and services2. Individual loss of spending ability and social issues2. Individual loss of spending ability and social issues1. Frictional1. Frictional2. Structural2. Structural3. Cyclical3. Cyclical4. Seasonal4. Seasonaltemporary jobless businessjob replacedbetween jobs2. labor force2. labor force1. population1. population3. unemployed3. unemployed4. discouraged4. discouragedlabor not lookingnot working, but lookingover 16, working or looking everyonelabor forcelabor forceunemployedunemployedlabor force = 160 millionlabor force = 160 millionUnemployed = 32 millionUnemployed = 32 millionPopulation = 260 millionPopulation = 260 millionUnemployed /labor force = 32 million/160 million = .20 = 20%Unemployed /labor force = 32 million/160 million = .20 = 20%1. Frictional?1. Frictional?2. Structural?2. Structural?3. Cyclical?3. Cyclical?Deals with which type?Deals with which type?1. Frictional1. Frictional2. Structural2. Structuralbut no Cyclicalbut no CyclicalAt full employment there will still be some:At full employment there will still be some:actual unemployment may only get as low as actual unemployment may only get as low as 4 – 5 %4 – 5 %January DecemberWhite 8 8.5Black 15.7 15.8Hispanic 11.9 13Asian 6.9 7.2Adult men 8.8 9.4Adult women 7.9 8.120-24 years old 15.2 15.325-54 years old 7.9 8.555 and older 6.7 6.9January DecemberPrivate 50,000 139,000Manufacturing 49,000 14,000Retail 27,500 2,800Health care 10,600 26,700Financial -10,000 0Temporary -11,400 38,100Restaurant -4,400 3,300Construction -32,000 -17,000Government -12,000 -26,000Jobless rates by groupJobless changes by sectorNumbers in percentNumber of jobs added/lost1. A student who decides at mid-semester to devote the rest of the term to studying quits her part-time job1. A student who decides at mid-semester to devote the rest of the term to studying quits her part-time job2. A graphic artist who is out of work because a computer now does her job.2. A graphic artist who is out of work because a computer now does her job.3. A waiter who quits his job and is applying for the same type of work in a restaurant where morale is better.3. A waiter who quits his job and is applying for the same type of work in a restaurant where morale is better.4. The son of a local farmer who works 20-hour weeks without pay on the farm while waiting for a job at a nearby factory.4. The son of a local farmer who works 20-hour weeks without pay on the farm while waiting for a job at a nearby factory.5. A travel agent who is laid off because the economy is in a slump and vacation travel is at a minimum.5. A travel agent who is laid off because the economy is in a slump and vacation travel is at a minimum.6. A plumber who works 5 hours per week for his church (on a paid basis) until he can get a full-time job6. A plumber who works 5 hours per week for his church (on a paid basis) until he can get a full-time jobSome prices may even be going down!!a general rise in the price levela general rise in the price level1. Hyperinflation1. Hyperinflation2. Money loses value2. Money loses value1. Savings1. Savings2. Loans2. Loans3. Wealth3. WealthMay increaseAre easier to repayLose value1. Demand-Pull1. Demand-Pull2. Cost-Push2. Cost-Push1. Demand-Pull1. Demand-Pullbuyers demands greater than producers supply PriceQuantityP2P1Q1D1S1Q2New price and outputD2(increase in demand)Orig. price and output2. Cost Push2. Cost Pushsellers’ costs are passed on to buyersPriceQuantity/timeP2P1Q1DS1(initial equilibrium)Q2S2(new equilibrium)1. Nellie borrows $5,000 for her college expenses at an interest rate of 4 percent to be paid off over 5 years, during which time the inflation rate averages 6 percent.1. Nellie borrows $5,000 for her college expenses at an interest rate of 4 percent to be paid off over 5 years, during which time the inflation rate averages 6 percent.2. Oscar invests $3,000 in securities that pay 5.3 % annually for 10 years, and the inflation rate during that time averages 6.4 percent.2. Oscar invests $3,000 in securities that pay 5.3 % annually for 10 years, and the inflation rate during that time averages 6.4 percent.1. Nellie borrows $5,000 for her college expenses at an interest rate of 4 percent to be paid off over 5 years, during which time the inflation rate averages 6 percent.1. Nellie borrows $5,000 for her college expenses at an interest rate of 4 percent to be paid off over 5 years, during which time the inflation rate averages 6 percent.2. Oscar invests $3,000 in securities that pay 5.3 % annually for 10 years, and the inflation rate during that time averages 6.4 percent.2. Oscar invests $3,000 in securities that pay 5.3 % annually for 10 years, and the inflation rate during that time averages 6.4 percent.3. The Lynchburg National Bank commits to $4 million in 15-year mortgages at an average mortgage rate of 7.75 percent. The inflation rate averages 8 percent over this 15-year period.3. The Lynchburg National Bank commits to $4 million in 15-year mortgages at an average mortgage rate of 7.75 percent. The inflation rate averages 8 percent over this 15-year period.4. Barney bought a house in 1991 for $100,000 that he now plans to sell for $200,000. during this time the inflation rate has averaged 3 percent.2. calculations2. calculations1. Measures price changes1. Measures price changesby %amount in 2nd yearAmount in 1st (or base) year X 1002003 Price = $300 2003 Price = $300 2002 Price = $2602002 Price = $260For Example:For Example:$300$260 = 115.4year 1year 1year 1year 1Base year = Base year = X 100= 1.1538X 100Base year = 100 (always) Base year = 100 (always)YearMarket