UNIT TWO

• requests the transacts in an economy
• Resource(Product)Market- households sell resources and business buy resources 
• Factor Market- Hold factors of production 
• Firms- Sells finished products to households
• Households- Sell factor of production to business

GDP

Gross Domestic Product 

The market value of all finial goods and services ,produce with in a country's boards with in a year

Included                                                                 Not included 

• C-Personal consumption expenditures               Intermediate goods        
• IG-Gross Private Domestic Investment              Used/Secondhand goods
• G-Government spending                                    Purely Financial transactions
• XN-Net exports                                               Illegal Activities 
•                                                                          Unreported business activity
•                                                                         Transfer payments
•                                                                         Non-market activity  

Calculating GDP

Expenditures  - GDP=C+Ig+C+Xg(Ex-Im)        Income approach - W+R+I+P+Statistical adjustments  

                                                                          Wage+Rents+Interest+ Profits+indirect business                                                                                                taxes+Depreciation+Net foreign factor payment 

Equations 

Budget- Govt purchases of goods & services +Govt transform payments - Govt tax & fee collect (surplus - , Deficit +)

Trade- Exports - imports (Surplus+ , Deficit -)

GNP- GDP+ Net foreign factor payment

National Income  

• Consumption of employes+Rent+interest+Proprietors income
• GDP-indirect business taxes - Depreciation-Net foreign factor payment 

Disposable personal income National income-personal household taxes+Govt transform payments

Net domestic product  GDP-Depreciation 

Net national product GNP-Depreciation 

Real GDP-value of output produce in consent base year prices

Nominal GDP- value of output produce in current prices 

GDP Deflation-price index used to adjust from nominal to GDP

                     nominal GDP / Real GDP x 100

Consumer price index- current year/ base year x100
Inflation- GDP deflector of current year - GDP defector of base year / GDP deflector x100

Hurt by inflation                                Helped 

• lenders                                   Debtors 
• People with fixed income        People on lease 
• savers                                    

 UNEMPLOYMENT

the failure to use available resources particularly  labor to produce desire goods and services

4 to 5 % is good

 

#of unemployed /(# of employed + # of unemployed)  x100

Frictional - temporarily unemployed  or in between jobs

Structural -  Workers don't have transformable skills 

Seasonal - Due to the time of the year

Cyclical - Results in economic downturns

GPD GAP- the amount by each actually GDP falls short of potential GDP 

Okun's Law- For every 1% that actual unemployment exceeds the natural rate of unemployment