Limitations of GDP
What does GDP measure?
The value of all final goods and services produced in a country
What is unemployment?
People in the labor force who are willing to work but cn't find a job
Tracking the cost of a "market basket" of goods and services
x-axis?
y-axis?
Time
Real GDP
Two things GDP does not include?
Underground activity (illegal → drugs)
Non-market work (babysitting)
Intermediate goods
Transfer payments
Financial transactions (stocks)
Income distribution
Types of Unemployment?
Frictional
Structural
Cyclical
CPI formula?
(cost of basket in current year/cost of basket in base year) x 100
What are the 4 phases?
Expansion
Peak
Recession
Trough
How the movie shows limits of GDP?
Doesn't encapsulate everyone's quality of life
(Chris --> sleeping in public bathrooms while economy is still functioning)
Which unemployment(s) does NRU include?
Frictional and structural
What is inflation?
Inflation reduces purchasing power; when money buys you less over time as prices rise
What happens during recessions?
Expansions?
Firms cut back, jobs are lost
Job opportunities open and unemployment decreases
TRUE or FALSE
GDP is a good measure of well being
False
Formula for unemployment?
(#unemployed/labor force) x 100
Inflation formula?
(New CPI - Old CPI)/Old CPI x 100
What phase does most of Chris's life reflect?