GDP

• GDP


  The market value of all final good and services produced by an economy in a given time period
• GDP


  • Includes only goods and services that go through the market and have a market price
  • Calculated by multiplying quantity by price
  • Includes only final usage, no double counting
  • Measured over a one year period
• GDP is the market value of all final good and services produced by an economy in a given time period
• Main limitations of GDP 

  1. Nonmarket activities 
  2. no market --> no market price 
  3. Childcare 
  4. Homework  
  5. Auto consumption 
  6. You produce and you eat 
  7. Underground economy (price but no record) 
  8.  economy where there is no government record 
  9. No record and no tax 
  10. Legal price and illegal activities 
  11. Negative externalities 
  12. Negative effect of production --> Pollution 
  13. Green GDP= gdp growth is subtracted a little because of pollution 
  14. Quality of Life 
  15. Money 
  16. Safety 
  17. Education 
  18. Healthcare 
• Does not consider non market
• Things not considered in GDP

  • Child care
  • Underground economy
  • Government has no regulation
  • Legal and illegal
  • No record
• Negative externalities


  Negative affect of production
• Dimensions important but not captured by GDP

  • Quality of life
  • Health
  • Education
  • Safety
• GDP is high not just because of production but because of way it is measured
• Unemployment


  Do not have a job but are actively looking for jobs
• Actively


  They are looking for jobs over the course of 4 weeks
• Calculating unemployment rate


  Total number unemployed/labor force )X 100
• Unemployment rate- international comparison
• Unemployment


  A person who does not have a job but is actively looking for one
• Measure employment


  Unemployment rate=(total unemployment/labor force (employment and unemployment))x100
• Active population


  • Labor force
  • Non labor force
• Non labor force


  • Home worker
  • Retired
  • Disabled
  • Student
  • Discouraged workers
• Discouraged workers make it difficult to understand the unemployment rate
• US: Unemployment rate was very high during the great depression -25%
• Germany is desired because unemployment rate is low- high manufacturing sector
• Greece- 10.4% unemployment rate
• Types of unemployment


  • Seasonal
  • Frictional
  • Structural
  • Cyclical
  • Outsourcing
• An economy always has some sort of unemployment
• US is mainly seasonal, frictional, and structural unemployment
• Consequences of high unemployment rate

  • Economic: Loss of production and incomes
  • Social: Social unrest (riots)
  • Individual: Depression, Heart attack, Suicide, Murders, Poverty
  • Government has to pay more
• South Africa has the highest unemployment rate at 32.1%
• Subdivisions of unemployment


  • Gender
  • Age
  • Employers
  • Race
  • Educational level
• Unemployment in 2008 was higher for men due to the financial crisis and construction going down
• Age groups


  • 16-24 (highest unemployment)
  • 25-34
  • 35-44
  • 45-54
  • 55> (lowest unemployment)
• Employers want


  • Experience
  • Knowledge
  • Sense of responsibility
  • Team work
  • Family/family obligations
• Educational levels


  • BA> (lowest unemployment)
  • Some college
  • High school
  • Less than high school (highest unemployment)
• Unemployment rate of 25%
• Types of unemployment


  • Seasonal
  • Frictional
  • Cyclical
  • Structural
• Great Depression
• Unemployment in Greece is 10.4%
• Cyclical unemployment in Europe

  Europe never fully recovered from recession
• Inflation


  An increase in the general level of prices
• General


  Whole economy
• Measurement


  CPI - consumer price index
• CPI calculation


  P=(P2-P1/P1) x100