What is unemployment? the percent of people in the labor force who want a job but are not working

Work at least 1 hour a month considered employ
Temporary absent framework means your employ
Part time workers

Not in the labor force

• kids
• full time students 
• retirees 
• military personnel 
• mental Institution 
• jail 
• stay at home Dad/mom
• the discourage 

Unemployment rate = # of unemployed/ labor force ( employed plus unemployed) x100 

Standard 4-5%

4 types of Unemployment 

1) fictional unemployment  

"temporarily unemployment" or being between jobs 

skills but they aren't working

2) Seasonal unemployment

this specific type of fictional unemployment is due to time of year and the nature of the job

3) Structural unemployment 

changes in the structure of the labor force make some skills obselete 

works DO NOT have transferable skills and these jobs will never come back  

The permanent loss of these jobs is called "creative destruction" 

4) Cyclical employment 

employment that results from economic downtruns (recessions) 

as a demand for goods and services falls demand for labor 

frictional plus structural equals NRU (4-5%)

Oakum's law

when employment rises 1 percent above the natural rate GDPS falls by about 2 percent 

February 3, 2017

Nominal GDP vs Real GDP

Nominal GDP is value of output produce in current prices 
Price times Quantity can increase from year to year, it either output increase or prices increases

Real GDP is  the value of output produce inconstant base year prices adjusted for inflation 
measure economic growth use real GDP 
in the base year can increase year to year only its output can increases (only the quantity)

In the base year nominal and real GDP are equal. In years after the base year nominal exceed real GDP. In years before  the base year real GDP exceed nominal.
Real GDP = current quantity x base prices
GDP deflator- it is a price index use to adjust nominal to real GDP
Formula Nominal GDP/ Real GDP x 100

Consumer Price Index measure inflation by tracking changes in the price off a market basket of goods  for example (car, motorcycle)

Price a market basket of goods in a current year/ Price of market basket of goods in a base year x 100 Feburary 6, 2017

Inflation is a general rise in price level it reduces the purchasing power of a dollar
purchasing power is an amount of good and services that money buys


3 Causes of inflation
1) the government prints too much money ( the quality theory)
2) Demand pull inflation
too many dollars chasing too few goods excess of demand over output that pull prices upward
3) cost push inflation higher production costs increase prices

standard Inflation is 2to 3% inflation rate formula
Current - base/ base year price index x100

Rule of 70 is used to calcite the number of year it will take for the price level to double at any given rate of inflation

70/ annual inflation rate

Deflation vernal decline in the price level

Disinflation it occurs when the inflation rate it self declines

Real interest rate - the percentage increase in purchasing power that a borrower pays to the lender (adjusted for inflation)
Real = nominal interest rate - expected inflation

Hurt by inflation

• lenders  - people who fixed money (at fixed interest rates) 
• people with fixed incomes 
• savers 

Helped by inflation

• borrowers - people who brows money 
• a business where the price of the product increases faster than the price of resources 

Cost of living adjustment ( COLA)

Some Works have salaries that mirror inflation they negotiated wages that rise with inflation 

February 2, 2017

Calculating Income approach

National income
1st formula
Compensation of employees + Rental Income + Interest Income + Proprietress Income+ Corporate Profit

2nd formula 
GDP- Indirect business taxes - Depreciation- net foreign factor payments


Disposable Personal Income = National Income - Personal household taxes + government transfer payments

Budget = Government purchases of goods and services = government transfer payments - government tax and fee collection
 Positive answer means deficit
Negative answer mean surplus

Trade = Exports minus Imports
Positive answer means surplus
Negative answer means deficit

Net Domestic Product equals GDP- Depreciation
Net National Product equals GNP- Depreciation
Net Investment plus Depreciation equals Gross investment 
GNP = GDP + foreign factor payments

January 26 ,2017

Circular Flow Model

Household is a person or group that share their income

Firm/Business is an organization that produces good and services for sale 

Gross Domestic Product 

GDP - total value of all final goods and services produced within a country border in a given year

• includes all production and income earn within a the U.S by the U.Sand foreign producers 
• exclude proton outside the U.S even by Americans 

GNP Gross National Product

• the total value of all final good and services produced by Americans within a year 
• Includes production or income earn by americans anywhere in the world 
• exclude production by non Americans even in the U.S

C+Ig+G+ GDP

C= Consumption (67% of the economy) 

Ig= Gross private Domestic Investment (18% of the economy) 

• new factory equipment 
• factory equipment maintenance 
• construction of housing
• unsold inventory of produces built in a year   

G= Government Spending (17% of the economy (school bus,weapons) 

Xn= net exports (exports - imports) 2% of the economy  

Included C, Ig, G, Xn

• Excluded Intermediate goods use to make finish product 
• avoid double or multiple counting 
• used or second hand goods avoid double counting
•  Stocks and bonds no production 
• gifts and transfer payments (scholarship)
• illegal activities 
• unreported business activités 
• non market activity (volunteering, baby-sitting)