ECON 1113 1st Edition Lecture 7 Outline of Last Lecture I Supply Demand and Elasticity Who Really Pays a Tax A Tax Incidence II Per Unit Excise Tax A The General Case B Two Extreme Possibilities Outline of Current Lecture I Macroeconomic Measurements A Measuring the Value of Economic Activity Gross Domestic Product GDP 1 Nominal GDP Current Dollar GDP 2 Real GDP Constant Dollar GDP B Measuring the Cost of Living Consumer Price Index CPI C Measuring Joblessness Unemployment Rate U L Current Lecture I Macroeconomic Measurements A Measuring the Value of Economic Activity Gross Domestic Product GDP 1 The dollar value of all goods and services produced domestically over some time period a Domestically refers to the geographic boundaries of the country 2 Flow variable involved 3 How does one add together apples and oranges a Place value on goods and services at market prices b Both are relatively and absolutely valuable c Base Example Quantity Price 2 apples 1 apple 3 oranges 2 orange 5 pieces of fruit 8 worth of fruit d Higher Price Example These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Quantity Price 2 apples 2 apple 3 oranges 4 orange 5 pieces of fruit 16 worth of fruit i Though the price gained for the same amount of fruit increased the country did not have to better any of its resources it simply raised the price ii Nominal GDP Qcurrent x Pcurrent current dollar GDP e Example of Growth Quantity Price 4 apples 1 apple 6 oranges 2 orange 10 pieces of fruit 16 worth of fruit i The prices of the fruit remained the same but the amount of fruit sold increased ii Real GDP Qcurrent x Pconstant constant dollar GDP B Measuring the Cost of Living Consumer Price Index CPI 1 prices of a basket of consumer goods of current prices CPI prices of thesame basket of consumer goods measured at base period prices a Basket contains consumer goods and services used by the average or representative consumer i Fixed basket ii Quality changes difficult to measure iii Example personal computer between February 2014 and February 2015 PC of 2 2015 105 CPI 5 PC of 2 2014 100 b Bureau of Labor Statistics BLS i Agents collect consumer goods prices each month ii Referred to as inflation rates or changes in the CPI C Measuring Joblessness Unemployment Rate U L 1 Unemployment Rate percentage of the labor force without jobs 2 BLS a Sends out 60 000 questionnaires each month asking about labor market activity b Places people in one of three categories based on survey responses i Employed E people with jobs during the last month ii Unemployed U people without jobs who actively sought employment during the last month iii Not in the labor Force L people without a job who did not seek a job during the last month Retirees full time students stay at home spouses and parents unemployment U 3 Unemployment Rate labor force L a Vary significantly among demographics b Older 54 and younger workers 16 24 have U L rates higher than the national average as well as ethnically black individuals c Married people have U L rates lower than the national average d Current national average 5 6 D BLS Conductions 1 Monthly household survey 2 Monthly establishment survey a 150 000 business establishments sampled b How many workers on payroll at the end of the current month c How many workers on payroll at the beginning of the current month d New jobs created in January of 2015 200 000 3 Explains why GDP CPI and U L change
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