BUS 530: ECONOMIC
CONDITIONS ANALYSIS
LECTURE: 1
Introduction and Data of
Macroeconomics
1
Course Overview
 Prerequisites
Bus 525
 Requirements and Grading
 Four class tests (20%)
 One midterm (20%)
 Paper (20%)
 Final (40%)
 Class Materials
 N Gregory Mankiw. Macroeconomics. Sixth Edition.


Web-page: http://fkk.weebly.com
 Office: NAC 751
 Office hours: Friday 2pm-3pm, Sunday 5pm-6:30 pm.
2
Activity Schedule : BUS 530
Class
Date
1
27May
2
3 June
3
10 June
4
14 June(Regular
ST)
5
17 June
6
24 June
7
1 July
8
8 July
9
15 July
10
22 July
11
29 July
12
5 August
13
10 Aug-30 Aug
Exams
Test/Paper
Class test 1
Mid-term
Class test 2
Class test 3
Class test 4
Final
Paper
3
Make-up Policy
• There will be only one make-up for all examinations (midterms and final, no make-up for class tests ) towards the end
of the course to accommodate force majeure. All examination
dates are pre-announced. Please make necessary
arrangements with your office.
• Historically, the performance of students taking make-up
examinations were always poorer compared to students
taking examinations on schedule.
• I hope you will appreciate that it is not practical to offer a
customized course for any or group of individual student(s).
4
Learning Objectives
We will begin with:
 the issues macroeconomists study
 the tools macroeconomists use
 some important concepts in macroeconomic analysis
5
Important Issues in Macroeconomics
Macroeconomics, the study of the economy as a
whole, addresses many topical issues:
 Why does the cost of living keep rising?
 Why are millions of people unemployed,
even when the economy is booming?
 What causes recessions?
 Can the government do anything to combat
recessions? Should it?
6
Important Issues in Macroeconomics
Macroeconomics, the study of the economy as a
whole, addresses many topical issues:
 What is the government budget deficit?
How does it affect the economy?
 Why does countries such as the U.S. have such a
huge trade deficit and China have huge trade
surplus ?
 Why are so many countries poor?
 What policies might help them grow out of poverty?
7
The Historical Performance of Bangladesh Economy
Real GDP per capita of Bangladesh
600
2000 USD
550
500
450
400
350
300
Year
Source: Bangladesh Bank
8
GDP versus Population Growth Rates in the 1980’s
GDP Growth Rate in the 1980’s
GDP and Population Growth Rates
7.0
7.00
Growth Rate of GDP (%)
5.94
5.18
6.00
5.81
5.00
4.80
5.0
3.80
3.73
2.00
3.22
2.61
2.38
3.22
3.00
4.02
3.0
4.15
4.00
4.25
2.16
2.15
2.50
2.33
1.00
1.37
0.00
1970's
1.0
1980's
1990's
2000's
GDP Growth Rate
Population Growth Rate
Source: BBS and World Bank
9
The Historical Performance of Bangladesh Economy
Real GDP Growth Rate
7
6.63
6.5
Growth rate of GDP (%)
6.27
6
6.66
6.43
6.21
5.96
5.88
5.83
5.5
5.27
5.26
5
4.5
4.42
4
3.5
3
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
GDP Growth Rate
Source: Bangladesh Bank
10
Growth rate remains robust…2010
12
10.4
10
8.8
Growth Rate of GDP (%)
8
8
6.1
6
4.1
4
2
0
Bangladesh
India
Pakistan
Sri Lanka
China
11
The Historical Performance of Bangladesh Economy
Bangladesh Inflation Rate
12.00
10.00
Percentage
8.00
6.00
4.00
2.00
0.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year
Source: Bangladesh Bank
12
Inflation situation
Comparison of Inflation Rate on April '12
Rate of inflation (year to year)
12
10.86
10.36
10.8
10
8
5.5
6
3.98
4
2
0
•
Bangladesh
India
Pakistan
Sri Lanka
China
Source: Central bank of respective country
The Historical Performance of Bangladesh Economy
Bangladesh Unemployment Rate
5
Percentage
4
3
2
1
0
1984
1985
1986
1989
1991
Year
1996
2000
2003
2005
The unemployment rate of Bangladesh does not
show the correct picture. According to CIA Factbook,
40% are under employed.
14
Trend in the value of Bangladeshi Taka against US $
90
82
80
70
60
53.96
50
40
35.68
30
20
16.26
10
7.97
0
1973-74
1980-81
1990-91
2000-01
2010-11
Source: Bangladesh Bank
15
U.S. Real GDP Per Capita
(2000 dollars)
40,000
9/11/2001
First oil price
shock
30,000
long-run upward trend…
20,000
Great
Depression
Second oil
price shock
10,000
World War II
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
16
U.S. Inflation Rate
(% per year)
25
20
15
10
5
0
-5
-10
-15
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
17
U.S. Unemployment Rate
(% of labor force)
30
25
20
15
10
5
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
18
Why Learn Macroeconomics?
1. The macroeconomy affects society’s well-being.
In the US, each one-point increase in the unemployment rate
is associated with:
 920 more suicides
 650 more homicides
 4000 more people admitted to state mental institutions
 3300 more people sent to state prisons
 37,000 more deaths
 increases in domestic violence and homelessness
19
Why Learn Macroeconomics?
2. The macroeconomy affects your well-being.
In most years, wage growth falls
when unemployment is rising.
change from 12 mos earlier
4
5
3
3
1
2
1
-1
0
-3
-1
-5
-2
-3
1965
-7
1970
1975
unemployment rate
1980
1985
1990
1995
2000
percent change from 12 mos earlier
5
2005
inflation-adjusted mean wage (right scale)
20
How Economists Think?
Economists use models to understand what goes on in
the economy.
Economic models:
…are simplified versions of a more complex reality
•irrelevant details are stripped away
…are used to
•show relationships between variables
•explain the economy’s behavior
•devise policies to improve economic
performance
21
Endogenous vs. Exogenous Variables
• The values of Endogenous variables
are determined in the model.
• The values of Exogenous variables
are determined outside the model:
the model takes their values & behavior
as given.
• In the
model
of
supply
&
for
cars,
d demand
s
endogenous:
P, Q , Q
exogenous:
Y , Ps
22
A Multitude of Models
 No one model can address all the issues we care about.
 e.g., our supply-demand model of the car market…
can tell us how a fall in aggregate income affects price &
quantity of cars.
cannot tell us why aggregate income falls.
 So we will learn different models for studying different
issues (e.g., unemployment, inflation, long-run growth).
 For each new model, you should keep track of
its assumptions
which variables are endogenous, which are exogenous
the questions it can help us understand, and those it cannot
23
What is a Macro Model?
• A macro model is a mathematical structure
that describes the economy. A mathematical
structure is a set of equations, which allow us
to understand the economy more fully and to
predict what happens to it.
24
Feature of a Good Macro Model
• Should include the variable that we want to
predict
• Should capture the most important factors whose
effects we want to determine
• Its equations should be consistent with the way
the variables are defined and measured
• Its equations should be easily defended
• Should make predictions that are qualitatively in
line with the real world
• Should be easy to use
25
A Simple Sample Model
Y=C+I+G
Here, Y = income
C = consumption
I = investment
G = government spending
This comes from the definition of GDP and the
way it is measures. Remember, that GDP is a
measure of output, income and spending
26
Another Simple Sample Model
C = 0.9 (Y – T)
It relates consumption to income taxes. When
income tax is deducted from a person’s
paycheck, disposable income is found.
The equation suggests people spend 90% of
their disposable income and save the rest
27
Class Exercise 1
1. Solve for Y, given
G = 2000
T=2000
I = 900
2. What is Y, if taxes fall from 2000 to 1900?
28
The Data of Macroeconomics
Now, we will discuss…
…the meaning and measurement of the
most important macroeconomic statistics:
– Gross Domestic Product (GDP)
– The Consumer Price Index (CPI)
– The Unemployment Rate
29
GDP, CPI, Unemployment Rate
Gross Domestic Product (GDP) is the market value
of all final goods and services newly produced in a
country in a given period of time.
The Consumer Price Index (CPI) measures the
level of prices.
The Unemployment Rate tells us the fraction of
workers who are unemployed.
30
Gross Domestic Product: Expenditure and
Income
Two definitions:
– Total expenditure on domestically-produced
final goods and services.
– Total income earned by domestically-located
factors of production.
Expenditure equals income because
every Taka spent by a buyer
becomes income to the seller.
Income Expenditure and the Circular Flow
Income (Tk.)
Labor
Firms
Households
Goods
Expenditure
(Tk.)
32
Value Added
Definition:
A firm’s value added is
the value of its output
minus
the value of the intermediate goods
the firm used to produce that output.
Class Exercise 2
– A farmer grows a bushel of wheat
and sells it to a miller for $1.00.
– The miller turns the wheat into flour
and sells it to a baker for $3.00.
– The baker uses the flour to make a loaf of
bread and sells it to an engineer for $6.00.
– The engineer eats the bread.
Compute & compare
value added at each stage of production
and GDP
Final goods, Value added, and GDP
• GDP = value of final goods produced
= sum of value added at all stages
of production.
• The value of the final goods already includes the value of
the intermediate goods,
so including intermediate and final goods in GDP would
be double-counting.
Rules for computing GDP
1) To compute the total value of different goods and services, the
national income accounts use market prices.
Thus, if
If apples cost $0.50 each and oranges cost $1.00 each
GDP = (Price of apples  Quantity of apples)
+ (Price of oranges  Quantity of oranges)
= ($0.50  4) + ($1.00  3)
GDP = $5.00
2) Used goods are not included in the calculation of GDP.
3) The treatment of inventories depends on if the goods are stored or
if they spoil. If the goods are stored, their value is included in GDP.
If they spoil, GDP remains unchanged. When the goods are finally sold
out of inventory, they are considered used goods (and are not counted).
36
Rules for Computing GDP
4) Intermediate goods are not counted in GDP– only the value of
final goods. Reason: the value of intermediate goods is already
included in the market price. Value added of a firm equals the
value of the firm’s output less the value of the intermediate goods
the firm purchases.
5) Some goods are not sold in the marketplace and therefore don’t
have market prices. We must use their imputed value as an estimate
of their value. For example, home ownership and government services.
37
Real GDP Versus Nominal GDP
The value of final goods and services measured at current
prices is called nominal GDP. It can change over time either
because there is a change in the amount (real value) of
goods and services or a change in the prices of those goods
and services.
Hence, nominal GDP or Y = P  y, where P is the price
level and y is real output– and remember we use output and
GDP interchangeably.
Real GDP or, y = YP is the value of goods and services
measured using a constant set of prices.
38
Real GDP is computed in our apple and orange economy.
For example, if we wanted to compare output in 2002 and output
in 2003, we would obtain base-year prices, such as 2002 prices.
Real GDP in 2002 would be:
(2002 Price of Apples  2002 Quantity of Apples) +
(2002 Price of Oranges  2002 Quantity of Oranges).
Real GDP in 2003 would be:
(2002 Price of Apples  2003 Quantity of Apples) +
(2002 Price of Oranges  2003 Quantity of Oranges).
Real GDP in 2004 would be:
(2002 Price of Apples  2004 Quantity of Apples) +
(2002 Price of Oranges  2004 Quantity of Oranges).
39
Example
GDP 2008 (nominal) = 500 * 6 + 200 * 30 = 9000
GDP 2009 (nominal) = 600 * 5 + 150 * 60 = 12000
GDP 2009 (real) = 600 * 6 + 150 * 30 = 8100
So nominal GDP rose, while real GDP actually fell
40
Chain-Weighted Measure of Real GDP
In some cases, it is misleading to use base year prices that
prevailed 10 or 20 years ago (i.e. computers and college). In
1995, the US Bureau of Economic Analysis decided to use
chain-weighted measures of real GDP. The base year changes
continuously over time. This new chain-weighted measure is
better than the more traditional measure because it ensures that
prices will not be too out of date.
Average prices in 2001and 2002 are used to measure
real growth from 2001 to 2002.Average prices in 2002 and
2003are used to measure real growth from 2002 to 2003 and so
on. These growth rates are united to form a chain that is used to
compare output between any two dates.
41
Chain-Weighted Real GDP
 Over time, relative prices change, so the base
year should be updated periodically.
 In essence, chain-weighted real GDP
updates the base year every year,
so it is more accurate than constant-price GDP.
 Your textbook usually uses constant-price real
GDP, because:
the two measures are highly correlated.
constant-price real GDP is easier to compute.
42
Components of Expenditure
Y = C + I + G + NX
Total demand
for domestic
output (GDP)
is composed
of
Investment
spending by
businesses and
households
Consumption
spending by
households
Government
purchases of goods
and services
Net exports
or net foreign
demand
This is the called the national income accounts identity.
43
Bangladesh GDP Composition, 2009 - 2010
Tk. crore
% of GDP
Consumption
BDT 554771
79.9%
Investment
169511
24.41
Government
110523
15.38
Net Exports
-62093
-8.9
Source: Bangladesh Bank & Unnayan Onneshon
44
Consumption (C)
– Durable goods
Definition: The value of all
goods and services bought by last a long time
ex: cars, home
households. Includes:
appliances
– Nondurable goods
last a short time
ex: food, clothing
– Services
work done for
consumers
ex: dry cleaning,
air travel.
45
U.S. Consumption, 2005
$ billions
% of GDP
Consumption
$8,745.7
70.0%
Durables
1,026.5
8.2
Nondurables
2,564.4
20.5
Services
5,154.9
41.3
Investment (I)
Definition 1: Spending on [the factor of production]
capital.
Definition 2: Spending on goods bought for future
use
Includes:
– Business Fixed Investment
Spending on plant and equipment that firms will use to
produce other goods & services.
– Residential Fixed Investment
Spending on housing units by consumers and landlords.
– Inventory Investment
The change in the value of all firms’ inventories.
47
U.S. investment, 2005
$ billions
Investment
Business fixed
Residential
Inventory
$2,105.0
% of GDP
16.9%
1,329.8
10.6
756.3
6.1
18.9
0.2
Investment vs. Capital
Note: Investment is spending on new capital.
Example (assumes no depreciation):
– 1/1/2006:
economy has $500b worth of capital
– during 2006:
investment = $60b
– 1/1/2007:
economy will have $560b worth of capital
49
Stocks vs. Flows
A stock is a
quantity measured
at a point in time.
Flow
Stock
E.g.,
“The U.S. capital stock
was $26 trillion on
January 1, 2006.”
A flow is a quantity measured per unit of time.
E.g., “U.S. investment was $2.5 trillion during 2006.”
50
Stocks vs. Flows - examples
Stock
Flow
a person’s wealth
a person’s
annual saving
# of people with college
degrees
# of new college
graduates this year
the govt debt
the govt budget deficit
51
Class Exercise 3
Stock or flow?
• the balance on your credit card statement
• how much you study economics outside of
class
• the size of your compact disc collection
• the inflation rate
• the unemployment rate
52
Government Spending (G)
• G includes all government spending on
goods and services..
• G excludes transfer payments
(e.g., unemployment insurance payments),
because they do not represent spending on
goods and services.
53
U.S. Government Spending, 2005
Govt spending
Federal
$ billions
% of GDP
$2,362.9
18.9%
877.7
7.0
Non-defense
290.6
2.3
Defense
587.1
4.7
1,485.2
11.9
State & local
Net exports: NX = EX – IM
def: The value of total exports (EX)
minus the value of total imports (IM).
Source: Bangladesh Bank
55
Class Exercise 4
Suppose a firm
• produces $10 million worth of final goods
• but only sells $9 million worth.
Does this violate the
expenditure = output identity?
56
Why Output = Expenditure
• Unsold output goes into inventory,
and is counted as “inventory investment”…
…whether or not the inventory buildup
was intentional.
• In effect, we are assuming that firms
purchase their unsold output.
57
GDP:
An important and versatile concept
We have now seen that GDP measures
– total income
– total output
– total expenditure
– the sum of value-added at all stages
in the production of final goods
58
Other Measurements of Income
 Gross National Product (GNP):
Total income earned by the nation’s factors of production, regardless of
where located.
 Gross Domestic Product (GDP):
Total income earned by domestically-located factors of production,
regardless of nationality.
(GNP – GDP) = (factor payments from abroad)
– (factor payments to abroad)
 Net National Product (NNP), we subtract the depreciation of
capital-- the amount of the economy’s stock of plants,
equipment, and residential structures that wears out during the
year:
NNP = GNP – Depreciation
 National Income = NNP- Indirect Business Taxes
 Personal Income = National Income- Corporate Profits- Social Security
contributions-Net Interest+ Dividends + Govt. Transfer +Personal Interest Income
 Disposable Personal Income = Personal Income – Personal Tax
59
(GNP – GDP) as a percentage of GDP
selected countries, 2010
U.S.A.
Bangladesh
Brazil
China
India
U.K.
0.40%
4.31%
-14.29%
-3.39%
-5.88%
4.35%
Source: World Bank
60
Real vs. Nominal GDP
• GDP is the value of all final goods and services
produced.
• Nominal GDP measures these values using
current prices.
• Real GDP measure these values using the prices
of a base year.
61
Class Exercise 3
2006
2007
2008
P
Q
P
Q
P
Q
good A
$30
900
$31
1,000
$36
1,050
good B
$100
192
$102
200
$100
205
• Compute nominal GDP in each year.
• Compute real GDP in each year using 2006
as the base year.
62
Answers
Nominal GDP multiply Ps & Qs from same year
2006: $46,200 = $30  900 + $100  192
2007: $51,400
2008: $58,300
Real GDP multiply each year’s Qs by 2006 Ps
2006: $46,200
2007: $50,000
2008: $52,000 = $30  1050 + $100  205
63
Real GDP Controls for Inflation
Changes in nominal GDP can be due to:
– changes in prices.
– changes in quantities of output produced.
Changes in real GDP can only be due to
changes in quantities,
because real GDP is constructed using
constant base-year prices.
64
Bangladesh Nominal and Real GDP,
1950–2006
800000
700000
600000
BDT in crore
500000
400000
Nominal GDP
Real GDP
300000
200000
100000
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
65
GDP Deflator
Nominal GDP
GDP deflator = 100 
Real GDP
 The Inflation Rate is the percentage increase in the overall level of
prices.
 One measure of the price level is the GDP Deflator, defined as
Nominal GDP measures the current Taka value of the output of the
economy.
 Real GDP measures output valued at constant prices.
 The GDP deflator, also called the implicit price deflator for GDP,
measures the price of output relative to its price in the base year. It
reflects what’s happening to the overall level of prices in the economy.
66
Class Exercise 4
Nom. GDP
Real GDP
2006
$46,200
$46,200
2007
51,400
50,000
2008
58,300
52,000
GDP
deflator
Inflation
rate
n.a.
• Use your previous answers to compute
the GDP deflator in each year.
• Use GDP deflator to compute the inflation rate from
2006 to 2007, and from 2007 to 2008.
67
Answers
Nominal
GDP
Real GDP
GDP
deflator
Inflation
rate
2006
$46,200
$46,200
100.0
n.a.
2007
51,400
50,000
102.8
2.8%
2008
58,300
52,000
112.1
9.1%
68
Two arithmetic tricks for
working with percentage changes
1. For any variables X and Y,
percentage change in (X  Y )
 percentage change in X
+ percentage change in Y
Example: If your hourly wage rises 5%
and you work 7% more hours,
then your wage income rises
approximately 12%.
70
Two arithmetic tricks for
working with percentage changes
2. percentage change in (X/Y )
 percentage change in X
 percentage change in Y
Example:
GDP deflator = 100  NGDP/RGDP.
If NGDP rises 9% and RGDP rises 4%,
then the inflation rate is approximately 5%.
71
Consumer Price Index (CPI)
• A measure of the overall level of prices
• Published by the Bureau of Statistics
• Uses:
– tracks changes in the typical household’s
cost of living
– adjusts many contracts for inflation (“COLAs”)
– allows comparisons of Taka amounts over time
72
How the Bureau of Statistics constructs the CPI
1.
Survey consumers to determine composition of
the typical consumer’s “basket” of goods.
2.
Every month, collect data on prices of all items
in the basket; compute cost of basket
3.
CPI in any month equals
Cost of basket in that month
100 
Cost of basket in base period
73
Computing the CPI
The Consumer Price Index (CPI) turns the prices
of many goods and services into a single index
measuring the overall level of prices.
For example, suppose that the typical consumer buys 5 apples and 2
oranges every month. Then the basket of goods consists of 5 apples
and 2 oranges, and the CPI is:
CPI= ( 5  Current Price of Apples) + (2  Current Price of Oranges)
( 5  2002 Price of Apples) + (2  2002 Price of Oranges)
In this CPI calculation, 2002 is the base year. The index tells how
much it costs to buy 5 apples and 2 oranges in the current year
relative to how much it cost to buy the same basket of fruit in 2002.
74
Class Exercise 5
Basket contains 20 pizzas and 10 compact discs.
prices:
2002
2003
2004
2005
pizza
$10
$11
$12
$13
CDs
$15
$15
$16
$15
For each year, compute
 the cost of the basket
 the CPI (use 2002 as the
base year)
 the inflation rate from
the preceding year
75
Answers
2002
2003
2004
2005
Cost of
basket
$350
370
400
410
CPI
100.0
105.7
114.3
117.1
Inflation
rate
n.a.
5.7%
8.1%
2.5%
76
The Composition of the CPI’s “basket” of
Bangladesh in 2010
13.50
5.68
Food & beverage
3.79
1.68
5.06
Cloth & foot wear
54.81
Housing & Housing rent
Fuel and& Lighting
9.09
Household effect
4.95
Medical
Education
Miscelleneous
Source: Bangladesh Bureau of Statistics
77
Reasons Why
The CPI may Overstate Inflation
• Substitution bias: The CPI uses fixed weights,
so it cannot reflect consumers’ ability to substitute toward
goods whose relative prices have fallen.
• Introduction of new goods: The introduction of new
goods makes consumers better off and, in effect, increases
the real value of the dollar. But it does not reduce the CPI,
because the CPI uses fixed weights.
• Unmeasured changes in quality:
Quality improvements increase the value of the dollar, but
are often not fully measured.
80
The CPI versus the GDP Deflator
The GDP deflator measures the prices of all goods produced, whereas
the CPI measures prices of only the goods and services bought by
consumers. Thus, an increase in the price of goods bought by firms or
the government will show up in the GDP deflator but not in the CPI.
Also, another difference is that the GDP deflator includes only those
goods and services produced domestically. Imported goods are not a
part of GDP and therefore don’t show up in the GDP deflator.
The final difference is the way the two aggregate the prices in the
economy. The CPI assigns fixed weights to the prices of different
goods, whereas the GDP deflator assigns changing weights.
81
Two measures of inflation in Bangladesh
10.00
300.00
9.00
250.00
8.00
7.00
Annual Percentage
200.00
6.00
5.00
150.00
GDP Deflator
CPI
4.00
100.00
3.00
2.00
50.00
1.00
0.00
0.00
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year
82
Measuring Unemployment
The labor force is defined as the sum of the employed and
unemployed, and the unemployment rate is defined as the
percentage of the labor force that is unemployed.
The labor force participation rate is the percentage of the adult
population who are in the labor force.
Unemployment Rate = Number of Unemployed
X 100
Labor Force
Labor-Force Participation Rate = Labor Force
 100
Adult Population
83
Categories of the population
• Employed
working at a paid job
• Unemployed
not employed but looking for a job
• Labor force
the amount of labor available for producing
goods and services; all employed plus
unemployed persons
• Not in the Labor force
not employed, not looking for work
84
Class Exercise 6
U.S. adult population by group, June 2006
Number employed
=
144.4 million
Number unemployed
=
7.0 million
Adult population
=
228.8 million
Use the above data to calculate
 the labor force
 the number of people not in the labor force
 the labor force participation rate
 the unemployment rate
85
Summary
1. Gross Domestic Product (GDP) measures both total
income and total expenditure on the economy’s output
of goods & services.
2. Nominal GDP values output at current prices;
real GDP values output at constant prices. Changes in
output affect both measures,
but changes in prices only affect nominal GDP.
3. GDP is the sum of consumption, investment,
government purchases, and net exports.
CHAPTER 2
The Data of Macroeconomics
86 86
slide
Summary
4. The overall level of prices can be measured by either
– the Consumer Price Index (CPI),
the price of a fixed basket of goods
purchased by the typical consumer, or
– the GDP deflator,
the ratio of nominal to real GDP
5. The unemployment rate is the fraction of the labor
force that is not employed.
CHAPTER 2
The Data of Macroeconomics
87 87
slide