Economic Indicators
• Business Cycle
– “Real” GDP versus “Nominal”
– GDP Deflator
– C+I+G+NX
– 6 month contraction = Recession
• Unemployment Rate
– 4 Types
– Calculation
• Inflation
– CPI/GDP Deflator
– Cost of Living Adjustment
– “Real” Income
GDP
• Total value of all final goods and services
produced within a country within a given
year.
• Real GDP- accounts for inflation.
• C
+ I
+ G
+ NX
_______ _______ _______ ___________
Business Cycle
Recession- real GDP goes down for at least 6 months.
R
E
A
L
G
D
P
GDP Deflator
• Nominal $$$$/GDP deflator = Real $$$
• Real $$$ = Adjusted
GDP
• C + I + G + NX
• Don’t Count
– Used
– Transfers
– Non-market
– Intermediate goods
All Stats are for People ___ or Older
•
•
•
•
Population = 1000
Pop. with jobs = 600
Pop. Without jobs = 400
Pop. Actively seeking employment in past
month = 190
• Pop. from previous category who currently have
a job = 40
Unemployment Formula
Unemployment Rate=
Unemployed Persons/Total Labor Force X 100
Labor Force= all civilians 16+ who are working or
looking for a job
Unemployed Persons= 16+ civilians who are
looking for a job but do not have one
Types of Unemployment
• Frictional- temporary while searching
• Structural-lack of skills/lack of need for
skills/replacement by
technology/replacement by merger or
streamlining
• Cyclical- related to health of overall
economy
• Seasonal- seasonal
• Not
Not Unemployed If…
•
•
•
•
Under 16
Have a Job
Are not actively seeking a job
Are not currently available to work
Unemployment (National)
Unemployment Formula
Unemployment Rate=
Unemployed Persons/Total Labor Force X 100
Labor Force= all civilians 16+ who are working or
looking for a job
Unemployed Persons= 16+ civilians who are
looking for a job but do not have one
Unemployment (National)
Unemployment (National)
Labor Force Participation Rate
• % of working age people who are
– Working
– Looking for a Job
• Working Age
– 16-64
Labor Force Participation Rate
Labor Force Participation Rate
Labor Force Participation Rate
•
•
•
•
•
Frictional
Structural
Cyclical
Seasonal
Not
Hit the debt ceiling, government
slashes spending, GDP tanks
•
•
•
•
•
Frictional
Structural
Cyclical
Seasonal
Not
You can’t stand this class anymore,
drop out, and start looking for work
•
•
•
•
•
Frictional
Structural
Cyclical
Seasonal
Not
•
•
•
•
•
A former switchboard operator is
having trouble finding a skilled
position
Frictional
Structural
Cyclical
Seasonal
Not
New Jersey surf instructor in
January
•
•
•
•
•
Frictional
Structural
Cyclical
Seasonal
Not
Mr. Parish this summer.
•
•
•
•
•
Frictional
Structural
Cyclical
Seasonal
Not
Which Type of Unemployment?
• With new and easier tax software, John is
afraid H&R Block might not need him in a
few years.
– Frictional
– Cyclical
– Structural
– Seasonal
Poor __________ Assignment
• A. Write a brief story about a person who
experiences all four types of unemployment
within one year and then drops out of the
labor force
• B. Title it- Poor (name of character)
• C. Put the type of unemployment in
parenthesis, behind each example.
(i.e. structural)
Calculate
Population =
10,000
Population 16-64 =
8,000
Employed Persons =
5,000
Unemployed Persons =
350
--------------------------------------------------------Labor Force = ____________
Unemployment Rate = ______________
Labor Force Participation Rate = _______
Labor Force Participation Rate
• % of working age people who are
– Working
– Looking for a Job
• % working age population in the labor
force
• Working Age
– 16-64
Calculate
Population =
10,000
Population 16-64 =
8,000
Employed Persons =
5,000
Unemployed Persons =
350
--------------------------------------------------------Labor Force = 5,350
Unemployment Rate = 6.54%
Labor Force Participation Rate = 66.88%
Consumer Price Index
• Measures change in price level of a “fixed
basket of goods”
• Urban Areas
• Used for Social Security “cost of living”
adjustments
Consumers Price Index
Subgroups
June 2000 June 2001
Restaurant meals and ready-to-eat
food
Household appliances and
furnishings
1016
1054
996
1043
Clothing
1005
1022
Footwear
1000
1006
Alcoholic drinks
1015
1041
Stationery, books, magazines and
newspapers
1008
1066
All Groups
1020
1053
Consumer Price Index
• Babe Ruth’s Salary
– 1931= $80,000
• Average Player Today= $2,272,620
Consumer Price Index
• Herbert Hoover= $75,000
• President Obama = $400,000
CPI (Consumer Price Index)
GDP Deflator versus CPI
• GDP Deflator- changing basket
• CPI- fixed basket
Stock Indexes
measure the performance of a segment of the stock market
• Dow Jones Industrial Average
– 30 Large Companies
• NASDAQ
– 3,000 companies
– Technology/growth companies (ex- Google)
• S&P 500
– 500 companies of various industries
NASDAQ
Economic Indicators
• Business Cycle
– *GDP = 16.7 Trillion
– GDP Growth = 1.9%
• Unemployment Rate
– *5.9%
• Inflation
– CPI = 1.5%
• Stock Indices
Externalities
• Consequence of economic activity
affecting an uninvolved party
• Positive or Negative
• Production or Consumption
Externalities
• Sand Casino in Bethlehem
• Positive?
Negative?
• Production?
Consumption?