Econ 4.3

Monday, February 15, 1999

Announcements:

Lecture notes:  

Chapter 8: Macroeconomic Concerns: Unemployment, Inflation and Growth

Nominal GDP

• Nominal GDP is GDP measured in current dollars
• Current Dollars: the current price that one pays for goods and services

• GDP Component, 1998 ($ billions)
  

  GDP = C + I + G + (EX - IM)	$8,508.9
  Consumption (C)	$5,806.0
  Investment (I)	$1,369.2
  Government (G)	$1,487.8
  Net Exports (EX - IM)	- $157.1
  GDP =	$7,549.9 ($92)

• Inventories
  • Desired Inventories: what is ordered and what is expected to sell
  • Undesired Inventories: what is not expected to sell

Recession

• Recession: A recession is a period in which real GDP declines for at least two consecutive quarters. Most recessions are marked by falling output and rising unemployment
• Depression: a prolonged and deep recession

• Great Depression: 1929 - 1933

• The Recession of 1980-1982

Defining Unemployment

• Employed: any person 16 years or older, (1) who works for pay, either for someone else or in their own business, for one or more hours a week, (2) who works without pay for 15 hours a week in family business, or (3) who has a job but has been temporarily absent, with or without pay.
• Unemployed: A person 16 years or older who is not working, is available for work, and has made specific efforts to find work during the previous four weeks.
• Labor Force: The number of people employed plus the number of unemployed
• Labor Force = Employed + Unemployed
• Population = Labor Force + Those Not in Labor Force
• Unemployment Rate = Unemployed / Labor Force
• Labor Force Participation Rate = Labor Force / Population

Unemployed Rates and Demographics

Types of Unemployment

• Cyclical: due to business cycle movements in GDP
• Frictional: due to job search activities
• Structural: due to changes in economic institutions, geographic displacement, technological change, discrimination