Macroeconomics Week 5
Macroeconomics Week 5 ECON 200-002
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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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