Flashcards in Revision Deck (14):
The dollar value of all goods and services produced within a countries borders in a year
Things not included in GDP calculation
Intermediate goods - things that go into the making of a final product.
Non production goods - stocks and share trading
GDP Calculation (expenditures)
GDP = C+I+G+(X-M)
Unemployment rate definition
The percentage of people in the labour force who want a job but are not working
Labour force - people above 16 able and willing to work
(Total unemployed/Total in labour force)x100
People who are in between jobs
Qualified worked with transferable skills
Specific type of frictional unemployment that depends on the time of year(ski instructor for example)
Changes in the economy where jobs are no longer needed. Think self service desks.
Workers must learn a new skill to get a job.
Economy has entered the recessionary stage in the business cycle and people are losing their jobs. Aggregate demand falls and therefore so does the need for labour.
Natural rate of unemployment
Made up of structural + frictional unemployment.
This is the amount of unemployment that exists when the economy is in a healthy state.
Criticisms of the unemployment rate
Discouraged workers - unemployed but have given up looking for a job
Underemployed workers- Part time workers - they are considered to be fully employed by the unemployment rate but still want more work for themselves.
Nominal wage vs real wage
Nominal wage is wage measured by dollars rather than purchasing power. If you get 5EUR in wages but inflation goes up 10%, you cant buy the same as before
Real wage factors in inflation - they will pay you 5.50EUR instead
Consumer Price Index
Best way of measuring inflation.
Base year set at 100, each year is compared to it.
CPI = (Price of basket/Price of market in base year)*100
GDP Deflator calculation
Nominal GDP/Real GDP*100