Core-020 Unemployment and Inflation
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About Core-020 Unemployment and Inflation
About the Teacher
Jay Moulton
Jay Moulton is a business veteran. In short:
- Corporate finance and turnaround expert in U.S. and Canada
- CEO or operator of numerous companies in many industries
- 30 years of actually applying business economics principles
- Successfully led and invested in several leveraged buyouts
- Director or advisor to 30+ different companies
- Experience in both for-profit and not-for-profit sectors
- Producer of 700 professional videos and several TV shows
- Author of six economics and business strategy books
- Graduate of Harvard Business School MBA program
- Graduate of The Royal Military College of Canada
- Professional electrical engineer
- Governor of the Harvard Club of British Columbia
Unemployment and Inflation
MODULE 1
Economic cycles cause unemployment to rise and fall, based on the demand for goods and services. The economy's performance heavily influences jobs, opportunities, and quality of life. There is a very important correlation between real GDP and the rate of unemployment in the economy.
GDP Deflator vs CPI
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Learning objectives for this chapter - How Income Flows
The two main measures that economists use to measure price levels are the Consumer Price Index and the GDP Deflator. The CPI and GDP deflator are compared using bananas and airplanes as examples.
The two main measures that economists use to measure price levels are the Consumer Price Index and the GDP Deflator. GDP is the acronym for Gross Domestic Product. Both the CPI and GDP Deflator measure price levels in the economy.
The CPI is a measure of the cost of living for a typical household. To calculate CPI, we start with a basket services, food and household items that households consume.
Between 2000 and 2010 in the United States, the CPI rose from 100 to 127. If you purchased a house in 2000 for $100,000, and you could then sell that house for $127,000 in 2010, then you were just as well off as you were 10 years earlier.
GDP is the market value of all goods and services produced within a country within a given period. To calculate the GDP deflator in 2010, for example, we take nominal GDP, which is GDP measured in 2010 prices, and we divide by real GDP.
Let’s compare the CPI and GDP deflator using bananas and airplanes. Since households consume bananas, if the price of bananas rises, the CPI would increase. However, since we do not grow bananas in North America, the GDP deflator would not change.
Population: Employment and Unemployment
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In this lesson, you will learn to: Describe the concept of opportunity costs using the examples of guns and butter.
The "labor participation rate" is the number of people in the labor force as a percentage of the civilian population. Using this definition, the video explains why unemployment exists.
Economists classify employment activities using the concept of the civilian labor force. The civilian labor force is defined as the number of people age sixteen years old and over who are either employed or seeking employment.
Unemployed workers who are seeking work are included in the labor force alongside employed workers. The labor force participation rate is the number of people in the civilian labor force, both employed and unemployed, as a percentage of the civilian adult population.
The unemployment rate is the percentage of people in the labor force who are unemployed. The unemployment rate equals the number of unemployed adults divided by the number of adults in the labor force.
Economic cycles cause unemployment to rise and fall, based on the demand for goods and services. The economy's performance heavily influences jobs, opportunities, and quality of life. There is a very important correlation between real GDP and the rate of unemployment in the economy.
Unemployment and the Recessionary Gap
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In this lesson, you will learn to: Describe the differences between public goods and private goods
In this video we explore what happens when governments do not intervene during recessions. We begin by reviewing frictional unemployment, structural unemployment and cyclical unemployment.
There are three types of unemployment. The first is frictional unemployment. The second type of unemployment is structural unemployment. The third type of unemployment is cyclical unemployment.
Unemployment = Frictional Unemployment + Structural Unemployment + Cyclical Unemployment
In a recession, aggregate demand decreases and the aggregate demand curve shifts to the left creating a recessionary gap. Cyclical unemployment is created because aggregate demand has declined and goods are not being purchased.
This assessment will test your knowledge of Public Goods.
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