ECON 1051 1nd Edition Lecture 40 Outline of Last Lecture I. Calculating Real GDP II. GDP Deflator III. Inflation Outline of Current Lecture I. Unemployment a. Example numbersb. Types of Unemployment II. Measuring Inflation a. Definitionsb. GDP Deflator c. Consumer Price Index Current LectureI. Unemployment a. Example numbers and how to find them:i. Working-age population 1. Everyone above 162. Labor force divided by labor force participation rate ii. Employment – 140,025,000iii. Unemployment – 14,000,000 1. Labor force (154 million) – employment (140,025,000)iv. Unemployment Rate 1. 9.1% a. Unemployed/labor force 2. So we know 90.9% is the employment rate a. Can use this and number employed to get the labor forcei. 140,025,000/.909 v. Labor Force 1. 154 million a. Sum of unemployed and employed vi. Labor Force Participation Rate 1. 64.2% b. Types of Unemployment 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. Frictional unemployment 1. Short term2. Adults right out of college searching for a job ii. Structural unemployment 1. Jobs are available but they lack the correct set of skills iii. Cyclical unemployment 1. Economic recessions II. Measuring Inflation a. Definitions i. Inflation 1. Increase in price of living from one year to another ii. Price level1. A measure of the average prices of goods and services in the economy iii. Inflation rate1. The percentage increase in the price level from one year to the next b. GDP Deflator i. Because the GDP deflator includes the price of every final good and service, it is the broadest measure of price level we have and may not clearly indicate how inflation affects the typical household c. Consumer Price Index i. Consumer price index comes closest to measuring changes in the cost of living as experienced by the typical household ii. An average of the prices of the goods and services purchased by the typical urban family of four 1. 41.5% housing2. 14.8% food and beverages 3. 17.3% transportation4. 6.4% education and communication 5. 3.6% apparel 6. 6.3% recreation7. 6.6% Medical iii. The value of the CPI is set to equal 100 for the base year. In any other year, it equals the ration of the dollar amount necessary to buy the market basket of goods in that year divided by the dollar amount necessary to buy the market basket of goods in the base year multiplied by 100 iv. Example – pg. 658 1. Calculate CPI in 2012: a. Cost of consumer basket in 2012/cost in base year (1999) x100i. $900/$750 x 100 = 120 2. Calculate CPI in 2015: a. 915/750 x 100 = 122 3. Calculating inflation rate a. (122-120/120) x 100 =
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