Warm-up: Get a yellow text

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Warm-up Get a yellow text

• What does GDP stand for?
• How do we calculate GDP?
• What do we use to measure inflation?
• How do we measure unemployment?

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Begin Unit 3 Macroeconomics

• SSEMA1
• b. Define Gross Domestic Product (GDP), economic
  growth, unemployment, Consumer Price Index (CPI),
  inflation, stagflation, and aggregate supply and
  aggregate demand.
• c. Explain how economic growth, inflation, and
  unemployment are calculated.

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N.B. 22- Business Cycle and Economic Indicators

• You should be able to answer the following at the
  end of this lesson
• What is GDP, inflation, and unemployment? How is
  each calculated?
• What are the characteristics of the four types of
  unemployment?

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The Business Cycle

• The ups and downs of the economic activity
• The good times and bad times
• P. 310

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The Business Cycle

• 4 phases

• Expansion- increasing GDP and growth
• Peak- the top of the expansionary period- lowest
  unemployment
• Contraction- decreasing GDP-increasing
  unemployment
• Trough- the bottom of the contraction

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The Business Cycle

• Peak

contraction
Expansion
Trough
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Economic Indicators

1. GDP
2. Inflation
3. Unemployment

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MEASURES OF ECONOMIC PERFORMANCE

• GROSS DOMESTIC PRODUCT (GDP) total amount (and
  value) of goods that a country makes
• Real GDP adjusted for inflation
• Per capita GDP (per person)

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How its measured

• GDP sum of Consumption, Investment, Government
  Spending and Net Exports (exports imports)
• C I G (ex-im)

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GDP

• a) Consumer spending what people decide to spend
  their money on. (movie tickets, TV, go to the
  mall and shop)
• b) Business Investments

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c) National Government Spending

• National Defense
• Social Security payments to aged, disabled, and
  retired persons
• National Debt
• Income Security
• Medicare health care program available to all
  senior citizens regardless of income
• Health medicaid medical insurance program for
  low income persons

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National Government Spending
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d) Net Export

• Exports Imports
• Export goods that are sent out of the country
  (results in money coming into the country)
• Imports goods that are coming in from outside
  sources (other countries) results in money
  being sent out by home country

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Gross Domestic Product

• Per Capita GDP
• GDP of a Country / Population

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Inflation

• Rise in the prices of goods and services in an
  economy over a period of time
• Results in less purchasing power
• How is it calculated Consumer Price Index (CPI)
• Example

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Inflation Calculator

• http//data.bls.gov/cgi-bin/cpicalc.pl

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Types of Unemployment
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Frictional Unemployment

• People are temporarily unemployed
• Usually when people are moving in between jobs
  (ex. graduates or people changing jobs)
• There will always be some frictional unemployment

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Structural Unemployment

• Unemployment caused when your talents do not meet
  the requirements for the job
• Not enough jobs to support all the people who are
  trained in a certain field
• Technology causes less demand for human labor
• Another example a decline in coal mines leads to
  less demand for coal miners

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Cyclical Unemployment

• Due to the economic climate and state of the job
  market
• Rises and falls with the economy
• During times of economic growth, more jobs are
  available. Conversely, during a recession, less
  jobs are available.

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Seasonal Unemployment

• Unemployment due to the time of season
• For example, during Christmas, there are more
  retail job opportunities due to the increase in
  shopping
• Another example, a resort town along the coast
  will have fewer jobs available during the colder
  months

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Question 1What type of unemployment?

• Construction workers are laid off for the winter,
  but plan to return to work when the weather is
  better.

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Question 2What type of unemployment?

• Workers are laid off at a Pog factory. A
  downturn in the economy has lowered demand for
  luxury items.

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Question 3What type of unemployment?

• The United States has lost manufacturing jobs as
  a result of a change to a service-oriented
  economy.

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Question 4What type of unemployment?

• A fast-food worker graduates from college and
  quits his job to look for a better career.

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Question 5

• True or False?
• Unemployment in the U. S. has recently been
  higher than 8 percent.

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Quiz!!

1. In your own words, describe what GDP attempts to
   measure.
2. Explain the formula for calculating GDP.