2011. 2011. Day 2. Day 2. By: Aakriti, Gloria, Cynthia, Theresa. Daily Plan. GDP. Unemployment. Full employment. Activities. Homework. Hall of GDP. The GDP Deflator. The GDP deflator
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2011
2011
Day 2
Day 2
By: Aakriti, Gloria, Cynthia, Theresa
Daily Plan
GDP
Unemployment
Full employment
Activities
Homework
Hall of GDP
The values for the GDP deflator are not as quickly available as values for CPI. Therefore it receives less publicity than then CPI. The results of the two indicators (GDP deflator and CPI) give similar but not identical estimates of inflation.
Nominal GDP
Real GDP (real output in terms of dollars from some reference year)
=
Current value of the GDP Deflator (expressed in hundredths)
Current value of the GDP Deflator (expressed in hundredths)
Inflation redistributes purchasing power in arbitrary ways because of various types of indexation
full indexation (nominal income rises at the inflation rate)
partial indexation (nominal income rises at less than the inflation rate)
fixed incomes (nominal income stays constant)
- in 2010, A borrows $2000 at 7% per annum, 7% is the nominal interest rate, he has to pay $140 ($2000 * 7%) interest to the bank.
- in 2010, if the inflation rate is 3%, then the real interest rate is: 7% - 3% = 4%, so the bank only receives $80 ($2000 * 4%) in real interest.
Nominal interest rate
desired real interest rate
inflation premium
=
+
5%
2%
7%
If the inflation rate turns out to be higher, suppose, the inflation rate is actually 4%, then the real interest rate is 3% (7% - 4%), which is lower than the desired real interest rate, which is 5%. Therefore, the lenders are worse off, while borrowers are better off.
a. reference-year quantities valued at reference-year prices, divided by reference-year quantities valued at current-year prices.
b. reference-year quantities valued at current-year prices, divided by reference-year quantities valued at base-year prices.
c. current-year quantities valued at reference-year prices, divided by current-year quantities valued at current-year prices.
d. current-year quantities valued at current-year prices, divided by current-year quantities valued at reference-year prices.
a. those with fixed incomes
b. those with partially indexed incomes
c. those with fully indexed incomes
d. Borrowers
UNEMPLOYMENT THEATRE
THE LABOUR FORCE SURVEY
PARTICIPATION RATES
NOTE:
participation rate for women has increase steadily until early 1990s and has remained stable since
Decline in participation rate of men (due to early retirement)
increase in participation of young people since 1975 (students work part time)
CALCULATIONS
Official Unemployment Rate
Unemployment rate = Unemployment in labour force X 100
Labour force
= 1 277 600 x 100
16 689 400
= 7.7%
Participation rate
Participation rate = Labour force X 100 = 16 689 400 X 100 = 66.9%
Labour force population 24 945 100
DRAWBACKS OF THE OFFICIAL UNEMPLOYMENT RATE (A)
DRAWBACKS OF THE OFFICIAL UNEMPLOYMENT RATE (B)
DRAWBACKS OF THE OFFICIAL UNEMPLOYMENT RATE (C)
TYPES OF UNEMPLOYMENT (A)
1. Frictional unemployment = unemployment due to being temporarily between jobs or looking for a first job
TYPES OF UNEMPLOYMENT (B)
2. Structural unemployment= unemployment due to a mismatch between people and jobs.
TYPES OF UNEMPLOYMENT (C)
3. Cyclical unemployment= unemployment due to fluctuations in output and spending
4. Seasonal unemployment= unemployment due to the seasonal nature of some occupations and industries
FULL EMPLOMENT CABIN
Full Employment
The Rise in the Natural Unemployment Rate
STRUCTURAL CHANGE
MINIMUM WAGES
Wage increases and employment have an inverse relationship because if a 10 percent increase in minimum wage it reduces employment by 1 percent in males and 2.7 percent in females
The Costs of Unemployment
David Foot suggests that our ages can give us insights into our economic futures
the baby boom generation (born between 1947 and 1966) which includes Generation X (born between 1960 and 1966)
the baby bust generation (born between 1967 and 1979)
the baby boom echo (born between 1980 and 1995) which includes Generation X-II (born between 1990 and 1995)
According to Foot
economic conditions are easiest for the baby bust generation and the first parts of the baby boom generation and baby boom echo
economic conditions are hardest for Generation X and Generation X-II
Female
Male
90
80
70
60
50
Age
40
30
20
10
0
300
300
250
200
150
100
50
0
50
100
150
200
250
Population in thousands
Canada’s Population Pyramids P244