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Macroeconomics Week 5

by: Kiera Mossburger

Macroeconomics Week 5 ECON 200-002

Kiera Mossburger

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These notes cover the topics discussed in class throughout the week. Topics included are Basic Corrections in GDP, Questionable Forms of Consumption, Types of Unemployment, and Measurement of Emplo...
Principle Macroeconomics
Paul George Burkett
Class Notes
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This 3 page Class Notes was uploaded by Kiera Mossburger on Sunday September 25, 2016. The Class Notes belongs to ECON 200-002 at Indiana State University taught by Paul George Burkett in Fall 2016. Since its upload, it has received 3 views. For similar materials see Principle Macroeconomics in Macro Economics at Indiana State University.

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Date Created: 09/25/16
Macroeconomics Week 5 Basic Corrections of GDP  Inflation NominalGDP o Real GDP =  ∗100 GDPDeflator o GDP deflator­ a benchmark for comparison  EX: 2014 Data                                                                                            [($17,341.1 Billion)/ (108.7%) ]* 100 = $15,961.7 Billion   Population RealGDP o Real GDP per capita =  Population  Real GDP per capita goes to corporations and houses  GDP Problems That Are Not Counted  Shadow economy (underground economy)­ activity that generates income, involves  production of a good, and spending o Criminal  Drug deals o Informal Activity  Cleaning houses  Odd jobs  Domestic labor/ household work  Leisure time  External costs­ costs of the market that are not included in market prices o Pollution o Crowding effects o Advertising  Depletion of natural resources o Coal mining is nonrenewable  Public goods­ jointly used goods with some non­exclusions  Free riders­ gain benefits without contributions  No connection between cost and benefit of a good  Overemphasis on private goods, under emphasis on public goods o Internet o Free concerts o Information o National Defense  GDP valued national defense  government purchases Questionable Forms of Consumption  Emulative­ when one buys things because everyone else has it o Not better off  Addictive­ when one buys because they feel driven, not because of an actual need o Addict is ‘better’ off  External­cost­driven­ coping with external costs by buying more things o Not deducted from GDP = worse off  EX: Buying earplugs because noise  Compulsive­ when one is forced to buy o Adds to GDP, not one’s well being  EX: overdraft fees, ink cartridges, self­serve Types of Unemployment 1. Seasonal­ job only available during certain times of the year; caused by seasonal changes  in the demand for labor by firms a. Has an element of choice b. EX: Teachers 2. Frictional­ the job is out there, but they haven’t found it yet a. People who quit a job & searching for a new one b. New job seekers (just entered job force) who turned down at least one job offer i. Assume job expectations are realistic ii. Least involuntary  iii. 1% of population 3. Structural­ serious mismatches between job­openings & job seekers a. Skills, location, discrimination b. More involuntary than frictional 4. Cyclical­ number of job­openings < the number of job seekers a. Happens during stagnation (recession) b.  “Most involuntary” Wage Demand Supply W1 W2 0 L2 L1 Labor Measure of Employment OfficiallyUnemployed  Official Unemployment rate (BLS) =  Official Labor Force∗100 o Officially Unemployed­ not working & actively seeking; currently available for  work o Official labor force­ either working or officially unemployed  Bias 1: people might say they’re looking for work but aren’t  Bias 2: somebody might be out of work but won’t admit it   Involuntary Part­Timers (IPT)­ those working, but want/need more hours o Counted in the labor force o Not counted as officially unemployed  Discouraged Workers (marginally attached)­ those who are not working, available, but  not currently searching o Does NOT include someone who is unavailable to work o Not counted as officially unemployed o Not counted in the labor force  Underemployment proper­ overqualified for a job, employed less than full­time  Prison population  Hidden employment o EX: enlistment in the Army  Alcoholism/ Drugs with depression from unemployment


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