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Unit II: Macroeconomic Indicators

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Erin Funk

on 19 February 2014

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Transcript of Unit II: Macroeconomic Indicators

Unit 2: Macroeconomic Indicators
Essential Vocabulary
GDP- the monetary value of all the finished goods and services produced within a country’s borders in a specific time usually annually
Unemployment- the percentage of the people in the labor force who are not working
Frictional Unemployment- the unemployment that arises from normal labor turnover—from people entering and leaving the labor force, from quitting jobs to find better ones, and from the ongoing creation and destruction of jobs
Structural Unemployment- the unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs
Cyclical Unemployment- the fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion
Full employment- when there is no cyclical unemployment or, equivalently, when all the unemployment is frictional, structural, or seasonal
Inflation v. Deflation- inflation is a general increase in prices and fall in the purchasing value of money but deflation is a situation in which the price level is falling and inflation rate is negative
Essential Formulas
GDP = C + I + G + NX
C= consumption expenditure, I= investment, G= government expenditure on goods and services, and NX= net exports of goods and services
Real GDP- a macroeconomic measure of the value of economic output adjusted for price changes
Economic growth rate- expressed as the annual percentage change of real GDP
Unemployment rate- the percentage of the people in the labor force who are unemployed
Essential Formulas
Output gap- real GDP minus potential GDP expressed as a percentage of potential GDP
Consumer Price Index (CPI)- a measure of the average of the prices of the goods and services that an average urban household buys.
Divide the cost of the CPI market basket in the current period by its cost in the base period and then multiplying by 100
Real Inflation- the percentage change in the price level from one year to the next
Essential Model
Business cycle- a periodic but irregular up-and-down movement of toal production and other measures of economic activity
Political Cartoons
Full transcript