economics 101 notes (2)

Not-So-Instant ProjectBy Christöffer Wilsån

Unemployment Types

1) Frictional (temporary)2) Structural (user error)3) Cyclical (layoffs)

Stability in Prices

1) Inflation (increase in prices annually)2) Disinflation (decrease in rate of inflation)3) Deflation (opposite of inflation)

Economic Growth

● Measured in GDP (Gross Domestic Product), the market value of all final goods/services.

● Nominal GDP v. Real GDP -- Nominal includes inflation, Real does not.

Favourable Balance of Trade

Ideal: Exports > ImportsU.S. imports more than exports.

Limit Government Growth

Government growth is bad. Probably. That’s what we think, anyway (that’s what we’re told, anyway). So, uh, limit the government and taxation. Sounds like a plan. Taxation is bad because I can see it directly affecting me.(sarcasm intended -- pro-taxes)

Labor Force

Labor Force = Total number of people seeking employment in a country (and/or unemployed).

Unemployed?

You meet these requirements:● 16+ years of age.● Must have searched for a job within past 4

weeks.● Still haven’t found a job.

“AND” logic statement ELSE({local.unemployment = 0})

Structural Unemployment

When a worker has permanently lost his/her job.Ex.: shipbuilders (less demand globally), typesetters, etc.

Frictional Unemployment

Temporary unemployment - movement betweens jobs, careers, and/or locations.Ex.: Someone quits a job and looks for a new one, recent move-in looking for a job, etc.

Cyclical Unemployment

= Not enough demand to employ all who seek.

Unemployment: cont.

Natural rate of unemployment is the minimum sustainable rate of unemployment without an increase of inflation.

Seasonal Unemployment

Ski instructors, Alaskan fishermen, etc.

{Transition}U.S. population includes both legal and illegal immigrants.Labor force is the amount of people willing AND able to {work}.Civilian labor force is total number of employed and unemployed persons {able to work?}.Labor force participation rate = civilian labor force divided by people of working age.

Labor Force Dropouts (discouraged workers)

Reasons including:● Care for elderly/children● Transportation/health issues● Additional schooling● Lack of skill● Too young/old● Etc.

LFPR: cont.

Only includes noninstitutionalized (uninstitutionalized?) populous.Doesn’t include those in homes/schools for mentally/physically/sanity-handicapped personnel, or orphanages, or jails/prisons.

Civilian ≠ Military

Non-civilian government jobs (such as military) aren’t included in the LFPR.

GDP ConfusionsThe market value of all the final goods and services produced in an economy in a year.Final good = tires sold in shop (≠ tires on new car).Produced = year of production (≠ year sold in).Hamburgers produced in China by a US company are part of China’s GDP.Does not include: illegal transactions, stocks/bonds sales, things produced at home but not sold (e.g. cooking), sales of used goods.

Inflation v. Price Level

Inflation - rise in general prices based on some baseline.Price Level - measured with consumer price index, the weighted average of all goods and services in an economic system.

Balloon size is price level; inflation is rate of growth based on flame.

Unanticipated Inflation Winners

Winners: holders of assets that rise in value faster than other assets rise in value; debtors (including governments).Losers: Savers, fixed-income individuals, creditors, credit cards owners, people with loans, long-term bond holders.Solution: Toilet Paper Rule.

Inflation Rate (Nominal v. Real)

Nominal = real + inflationReal = nominal - inflation

Nominal is what you see, Real is what you get.

Nominal v. Real?Example:GDP = $1B in the year 2000.In 10 years, there is no economic change.GDP = $1.1B in the year 2010.

Overall: Nominal inflation was 10%;Real inflation was 0%.Keep in mind: rates fluctuate and depend based upon what years you compare.

Supply/Demand Supplements

Increasing the demand (shifting the demand curve rightwards) increases the prices because of the Demand Pull.Cost Push is the leftwards movement of the supply curve increasing the prices.Cost Push can cause Stagflation, where prices rise and quantity falls.

The Consumer Price Index

(CPI) - A measure of the average change over time in the relative prices paid by urban consumers for a market basket of consumer goods and services.

“Understand these concepts, combat these concepts, and relearn these concepts.”

--Brunette and Ruff--