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PSU ACCTG 211 - Different Types of Cash Flows

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ACCTG 211 1st Edition Lecture 8Outline of Last Lecture II. Real vs Nominal GDPIII. Gross Domestic Product:IV. Product approach V. Example of Percent Change REAL from previous year VI. Example of how to Calculate GDP deflatorOutline of Current Lecture I. UnemploymentII. How is unemployment Calculated III. How did the Great Recession happenIV. Types of UnemploymentCurrent LectureI. Unemployment a. In January it is expected there was 234k jobs created i. Just an estimate, the official data is not released yetb. In December there were 252k jobs created c. In a better economic time the number should be around 350k-400kd. The unemployment rate is currently 5.6%e. Near 2010 the unemployment was around 10%i. GDP plummeted at the same time1. Real GDP growth fell to -4%?f. Low skilled teenagers have the greatest unemployment rate out of High school graduates and graduated college students during the great recession i. Teenagers: U=25%ii. HS degrees: U=11%iii. Because they ^ don’t have the right skill setII. How is unemployment calculateda. Unemployed: 16 years or older, do not have a job and looking for work 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.i. If you are not looking for work, you are not counted1. Retired, disabled, a full time studentb. Employed: if a person works at least one hour per week for pay i. These people are counted as employedii. Underestimates the unemployment rate c. Labor Force: unemployed + employedd. Discouraged workers: available for work but have not looked for a job during the past monthi. Problem with the unemployment rateii. Underestimates the unemployment rate e. Unemployment Rate: (Number Unemployed/ Labor Force)X100III. How did the Great Recession happena. The housing market collapsedi. People would buy houses just to flip themb. The financial system implodedc. Interest rates were highi. When the equity in your house plummets, you don’t have that live equity anymore d. Firms cut production and laid off workersi. Stock market plummeted1. Everyone sells because of a crisis in confidence e. Policy makers stepped in and created government stimulus and reduction in interest ratesi. Trying to restore confidence and encourage spending 1. Because of “double dip” employers still may not hirea. Double dip: the market will shoot right back down again2. Businesses are cautious about hiring3. Population keeps growingIV. Types of unemployment a. Cyclical Unemployment: Unemployment is unemployment caused by recession i. The type of unemployment we are talking about b. Structural Unemployment: Arises from mismatch of skills of workers out of work and the skills required for existing jobs1. Lasts for a longer time than cyclical unemployment2. Could possibly be fixed by the government supporting payments for education ii. Demand is lowiii. Do not have a right skill setiv. New technology 1. McDonalds workers are now robots v. Globalization 1. Outsourcing and offshoring 2. Hard to compete with global production pricesvi. Lack of education vii. Shifts in government priorities c. Frictional Unemployment: caused by the normal search time for workers with marketable skills to find work i. Frictional Unemployment is temporary ii. EX: college graduates; people changing jobs; seasonal workersiii. Workers have marketable skills and are either:1. Changing jobs (“I quit)2. Initially entering the work force3. Re-entering the work force4. Seasonally unemployeda. EX: Ski instructors 5. Between jobsa. EX: consulting firms iv. In general the causes of frictional unemployment are1. Normal transition to new job or lack of information in finding a new job d. Unemployment is never zero!i. Structural unemployment and frictional unemployment will always existe. Unemployment rate does not reflect i. Number of discouraged workersii. Workers who are working part time who would like to work full


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