Shortcomings of gdp pp499 500 national income

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ECON MICRO
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Chapter 21 / Exercise 2
ECON MICRO
McEachern
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Shortcomings of GDP, pp499-500National income, personal income, disposable income, disposable income per capita24
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ECON MICRO
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Chapter 21 / Exercise 2
ECON MICRO
McEachern
Expert Verified
Macroeconomic data at BEA.govNominal GDP in current dollars: table 1.1.5Real GDP: table 1.1.6Real GDP growth rate: table 1.1.1Nominal National Income: table 1.7.5Real Personal Income, Disposable Income, Disposable income per capita: table 2.6 Macroeconomic data at BLS.govUnemployment rate:Inflation rate:Labor force, number of employed, number of unemployed, labor participation rate:25
Business cycle26
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Unemployment across demographic groups (chapter 26)28
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Types of Unemployment and Related Issues (Chapter 26)1.Actual Unemployment Rate = natural rate plus cyclical unemployment rate2.Natural Unemployment Rate = structural unemployment plus frictional unemployment= 5 to 6 %-efficient level of unemployment3.Frictional Unemployment Rate—individuals who are temporarily out of work.-individuals with job skills that will be rehired soon4.Structural Unemployment Rate-- individuals who are long-term out of work.-individuals without job skills who likely will not be rehired soon5.Natural unemployment = frictional unemployment rate + structural unemployment rate(e.g., 5 = 2.5 + 2.5)6.Cyclical Unemployment Rate = actual unemployment rate minus natural unemployment rate (e.g., actual rate is 7.3 %, then cyclical rate = 2.3% if natural rate is 5%)7.Unemployment Gap = actual unemployment rate minus natural rate = cyclical unemployment8.GDP gap = actual GDP minus potential GDPOkun’s Law: inverserelation between unemployment gap and real GDP gap-if real GDP increases, then unemployment decreases-if real GDP declines (recession), then unemployment increases9.Personal and Societal Economic Costs of Unemployment 10. Social Non-Economic Costs of Unemployment11. Calculation of unemployment rate30
12. Natural real economic growth = 2 ½ to 3 %Actual GDP, Potential GDP, GDP gap = Actual GDP – Potential GDP31
RGDPTypes of Inflation and Related Issues (Chapter 26)1.Creeping Inflation—low inflation (less than 15%)2.Galloping Inflation—higher inflation (e.g., 100% inflation)3.Disinflation: declining inflation (e.g., inflation of 4% decreases to 3%)4.Deflation: negative inflation (e.g., inflation of 3% decreases to -1%)5.Hyperinflation-1000% or higherCause: government (Fed or Central Bank) prints excessive cash to pay government debt6.(p.541) Cost-push Inflation:Demand-pull Inflation: -decrease in aggregate supply- increase in aggregate demand7.Economic costs of inflation—nominal price effect (you must pay more money to buy a good) and real effects (a)Real income growth

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