Jan. 27.2016

Gross domestic product (GDP)- market value of all final goods and services produced within a nation in a given year

-what's not included in GDP

1. Intermediate goods-something that need further processing 

2. Used or second hand goods- already been accounted for 

3. Purely financial transactions-stocks and bonds 

4. Illegal activities( drugs)

5. Unreported business activity-tips 

6. Non-market activities- volunteering, babysitting 

7. Transfer payments- scholarships, welfare payments, social security. 

Jan.28,2016

Included in GDP

1. C-personal consumption expenditure 65% of American economy based on this

2. Ig-gross private domestic investment, factory equipment maintenance, nee factory equipment, construction of housing, unsold inventory or product built in a year 17%

3. G- government spending 20%

4. Xn-net exports (exports-imports) -2%

GNP-gross national product, total value of all final goods and services by citizens of that country on its land or foreign land. 

1-29-16

2 ways of calculating GDP

1. Expenditure Approach- add up all of spending on final goods and services produced in a given year. GDP=C+Ig+G+Xn. (Export-import)

2. Income approach- adds up all income that results from selling all final goods and services produced in a given year. W+R+I+P+statistical adjustments(indirect buissness taxes, depreciation, net foreign factor payment)

1. Compensation of employees-wages and salaries, pensions, insurance, health and welfare 

2. Rents- income received by property owners

3. Interest-money paid by private businesses to the suppliers of loans

4. Corporate profits- income of the corporation stock holders, dividends, and corporate income taxes

5. Proprietor income- income that comes from enterpenuers and partners in a business 

Feb 2,2016

-Nominal interest rates-percentage increase in money the borrower must pay the lender for a loan. Not adjusted for inflation. 

*unanticipated inflation

-real interest rate- percentage increase in purchasing power the borrower must pay the lender for a loan. Adjusted for inflation. (Nominal interest rate-inflation=real interest rate.)

*Anticipated inflation- fisher effect 

Nominal interest rate=expected interest rate+inflation premium. 

Hurt by inflation

1. Savers

2. Lenders/ creditors

3. People who are on a fixed income (elderly, welfare)

Helped by inflation 

1. Debtors 

Cost of living adjustments(cola)

- automatic wage increase when inflation occurs (New York and California)

Feb. 4 2016

- Unemployment- failure to use available resources. Particularly labor to produce desired goods and services 

- Labor force=employed and unemployed 

-above 16 years old

-able and willing to work 

-Not labor force

1. military

2. Students

3. Retired

4. Disabled

5. Homemakers

6. Mental institution 

7. Jail

8. Those who are not looking for a job. 

Unemployment rate-4 to 5% ideal rate of unemployment=full employment or natural rate of unemployment(NRU)

- how to calculate unemployment rate=# of unemployed/(# of employed+# of unemployed) x 100

4 types of unemployment- 

- Frictional- those who are searching for a job. Temporarily unemployed. In between jobs. Transferable skills. College or high school graduates. Laid off. Leave job looking for better job. 

- Structural unemployment- changes in structure of labor force. That makes some skills obsolete. These workers do not have transferable skills. Workers have to learn new skills. 

- Seasonal unemployment- due to the time of year and nature of the job.

-school bus drivers

-life guards

-Santa clause impersonators 

-construction workers

- cyclical-economic downturns such as a recession. As demand from goods and services falls and demand for labor falls and workers are laid off

-Walmart

-Macy's 

- frictional +structural employment=NRU

- Full employment= no cyclical employment. 

February 5th 2016

- GDP gap- amount by which actual GDP falls short of potential GDP

- Okun's law- for every 1 percent in which the actual unemployment rate exceeds the NRU a GDP of about 2 percent occurs. Ex: in 2012 the unemployment rate for Mexico was 7.4% the NRU for Mexico is 6%. 

-7.4-6=1.4x2=2.8. Actual unemployment rate-NRU

- rule of 70- used to determine how many years it takes for a value to double. Given a particular annual growth rate. 

-ex: if you put 20k in the bank and it earns a yearly interest of 7 percent how many years will it take for your income to double? Answer= 10. 70/7= how many years it takes to double. 

70/annual interest rate. 

https://www.youtube.com/watch?v=3x_GFkfp2kA <-------open video for more information