06 -- Macroeconomics

06 -- Macroeconomics - CPA BEC - STUDY UNIT 6...

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CPA BEC - STUDY UNIT 6 Macroeconomics: Core Concepts A. Three Principal Issues in Macroeconomics 1. Inflation is a sustained increase in the general level of prices. The rate of inflation is calculated by comparing the change in the two years’ indexes: the current year price index minus the prior year price index, divided by the prior year price index. Nominal income is the amount in money received by a consumer as wages, interest, rent, and profits. Real income is the purchasing power of the income received, regardless of how it is denominated. Demand-pull inflation is generated by demand outpacing the supply of goods to satisfy it. Cost-push inflation is generated by increased per-unit production costs. 2. The unemployment rate is stated in percentage terms. The formula used in the U.S. is the number of unemployed divided by the size of the labor force times 100. The numerator consists of those who are willing and able to work and who are seeking employment. Frictional unemployment is the amount of unemployment caused by the normal workings of the labor market. Structural unemployment results when the composition of the workforce does not match the need. Cyclical unemployment
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06 -- Macroeconomics - CPA BEC - STUDY UNIT 6...

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