ECON 204 1st Edition Lecture 6 Outline of Last Lecture X. InflationA. Who wins and loses relative to inflationOutline of Current LectureXI. Midterm PracticeA. Calculating GDPB. Nominal and real GDPC. EmploymentCurrent LectureXI. Midterm PracticeA. Calculating GDPPractice how to calculate GDP from a circular flow diagram (complete or incomplete).Y = income, in this case national incomeC = consumer spendingI = investment spendingG = government spendingNX = net exports (exports-imports)Y = C+I+G+NXExample from circular flow diagram:C=$650I =Not included on the diagramG=$100Imports=$20 Exports=$20 – NX=$0Y=$750Value of disposable income = flow of money into C minus the flow of money out of CDisposable income is not always equal to consumer spending.B. Nominal and Real GDPFor the midterm, practice being able to calculate the percentage change in nominal GDP between years.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.Example:2010Object Price Quantity TotalsLaptops $900 10 $9000DVD’s $10 100 $1000Pizzas $15 2 $30 Nominal GDP: $10,0302011Object Price Quantity TotalsLaptops $1000 10.5 $10,500DVD’s $12 105 $1260Pizzas $16 2 $32 Nominal GDP: $11,792To find the real GDP for 2011 (prices of 2010 w/ quantities of 2011)Object Price Quantity TotalsLaptops $900 10.5 $9450DVD’s $10 105 $1050Pizzas $15 2 $30 Real GDP: $10,530To calculate % change%change(x) = (final x – initial x)/ initial xReal GDP of second year= final xNominal GDP for base year= initial xExample: (10530 – 10030)/10030 = 4.98% change of real GDP(for midterm stick with 2 decimals)C. EmploymentBoring, OR has 200 people over the age of 16 (population). If the number of people employed is 150 and the number unemployed is 30, give the following:1. Labor Force Participation Rate2. Unemployment RateLabor force = unemployment +employment (150+30 = 180)LFPR=LF/population (180/200 = 90%)UR = unemployment/LF (30/180 = 16%)Recession hits and 20 people become discouraged and stop looking for work. (Repeat entire exercise but with 10 instead of 30)LF=150+10=160UR=10/160 – 6.25%UR does not include discouraged workers- can be misleading. Know definitions/types of unemployment for midterm.Equilibrium wage = intersection on graph where wage rate meets quantity of