GDP-the total market value of all final goods and services produced within a country in one year ■ Expenditure Approach: Add up aggregate spending on domestically produced final goods and services in the economy. ■ Income Approach:Sum the total factor income earned by households from firms in the economy.
■ Value Added Approach:Survey firms and add up the total value of their production of final goods and services. ○ GDP= C+G+I+X-IM ● Module 11 ○ Real GDP vs. Nominal GDP ○ Real or Nominal growth rate: (Year 2/Year 1) -1 ○ Real GDP= [Nominal GDP/ Price Index (calculated by GDP deflator)] x100 ○ Economic Growth = Growth Rate ○ Real GDP per capita = RGDP/Population ● Module 12 ○ unemployed + employed= labor force ○ percentage of unemployed out of labor force= unemployment rate ■ Unemployment rate overstates as people are always looking for work ■ Understates because of discouraged workers, marginally-attached workers, underemployed workers ○ Job loser, job leaver, re entrant, new entrant ● Module 13 ○ Frictional unemployed- looking for jobs ○ Structurally unemployed- because of minimum wages, labor unions, efficiency wages, side effects of public policy (unemployment benefits) ■ workers’ skills don’t match employers’ requirements ■ supply of workers exceeds demand ○ Cyclical unemployment- because of recessions ○ Natural Rate of unemployment= frictional+structural; changes because of ■
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