Measures of econ activity (9) Flashcards
Labor force (L)
-employed + unemployed
-Working or willing/ searching
- unpaid work does not count
Employment (N)
-ind. above 15 years old doing any kind of paid work
Unemployment (U)
-ind. out of job but willing and searching for a job
Unemployment Rate (UR)
-% of the LF that is out of work
Employment Growth Rate (NGR)
-Annual % increase/ decrease in the # of employed persons
Participation Rate (PR)
-Measure of the proportion of the population that is willing to work expressed as a percent of total pop able to work
-Willing to work/ able to work
Employment Rate (NR)
-# of persons employed expressed as a % of the civilians non-institutional pop aged 15 years and over
Seasonally Adjusted Unemployment Rate (SAUR)
Unemployment rate / Seasonal factors
Types of unemployment
Frictional, Structural, Cyclical
Frictional U
-Ppl quit voluntarily
-nothing to do with the econ
-personal choice, health, family
-when someone is done school and is searching for a job
-normal to have some frictional u in the econ
Structural U
-Not voluntary
-laid off because of restructuring, plant closure
-Change in tech, automating
-Normal in the econ
Cyclical U
-involuntary job loss
-slowdown in econ, recession
-want to avoid, not normal to have in econ and not desired
Target full employment unemployment rate
6%
-structural + frictional
-cyclical at 0%
3 factors of unemployment rate
1) attitudes and expectations of workers. Change job more frequently, expect more, benefits, etc = more frictional unemployment than before
2) tech progress = more structural unemployment
3) rise in LF participation of women = increase “willing to work” and takes time for the econ to absorb all those workers so for a period there is an increase in unemployment rate
Consumer price index (CPI)
-measure of the rate of change in prices charged by retailers for final goods and services bought by consumers in Canada
-based on fix basket of goods of 518 items: customers indicate the “weight” importance of these categories of goods
Annual Rate of inflation
Rate of change in the all-items index
Target Rate of inflation + why
IR = 2%
high rate = reduces ppl purchasing power, distorts functioning market mechanisms, interest rates rises, inefficiency and low prod
Inflation vs deflation
increase in level of prices vs decrease in level of prices
Industrial product price index (IPPI)
Measures the prices of finished and semi-finished goods at the producer level (opposed to retailer level)
Raw materials price index (RMPI)
measures the change in the prices of key raw materials paid by Canadian manufacturers such as wheat, veggies, animals, wood…
3 types of inflation
1) demand-pull
-demand side inflation
-caused by excessive demand
2) cost-push
-supply side inflation
-shortage of products that result given the demand for these products, cause a jump in prices hence inflation
3) Structural inflation
-wage price spiral
-cost push + demand pull interact with each other
-produces a wage price spiral: bc of rising product prices ppl demand higher wages and then reaction to the higher wages is increase in product price, etc.
GDP
Gross domestic product
-measure of tot production activity taking place within the boundaries of a nation’s economy during a given year
-market value of final goods and services
-expenditure approach: add together amount of money spent by sectors of econ to purchase the nations production
-factor income approach: add together factors incomes that are generated in the process of producing the goods and services demanded in economy
Value added
Value of output less the value of the inputs that were used in its production
Net domestic income
NDI = Wages salaries + interest + rent + profits + royalties
-measure of tot amount of income earned by households in exchange for providing resources or factors of prod to firms
Capital cost allowances CCA
money deducted by firms for depreciation
Indirect taxes
all taxes other than income taxes
Household income (HI) vs HDI
measure of the tot amount of income actually received by households but before personal income tax deductions and social security contributions VS minus all the personal taxes + SS contributions
Retained earnings
part of profit for reinvestment
Gross national income
GNI = like GDP but GNI tells us how much income we have earned from production whether it took place inside or outside our borders
GDP vs GNI
GDP = better keeping track of production activity in the country such as economic growth while the GNI measure is more appropriate national income, debt servicing and borrowing capacity
Real GDP
GDP after having removed effect of inflation
Rate of growth (GR)
-using real GDP comparisons
- positive = econ expanding, creating new jobs, more income more goods and services for consumption
-negative = econ is contracting, entering recession
Standard of living
SOL = Real GDP/ tot pop
higher standards of living = higher quality of life
-growth in standard of living= SOLGR= SOLt - SOLt-1/ SOLt-1
Pop growth
natural growth (births - deaths) + net migration (immigration - emigration)
-annual rate of growth = POPGR = POPt - POPt-1 / POPt-1 x 100
-real GDP must rise faster than pop
-rate of econ growth must exceed rate of pop growth
Productivity
-productivity (PRO) output per worker = real gdp / N
-prod growth rate (PROGR) = real gdp/Nt - Real gdp/Nt-1 / Real gdp/Nt-1 x100
indicators of ST econ performance
1) rate of unemployment
2) rate of inflation
3) rate of econ growth
indicators of LT econ performance
1) rate of productivity growth
2) rate of national savings
3) rate of gross fixed-capital formation or rate of capital investment
National savings rate (NSR)
total domestic annual saving measured as a percent of a country’s GDP
-investment rate (INVR) = gross fixed capital / GDP x 100
Desired target for rate of growth
GR = 3%
want growth bc of the pop growth: need to keep up
increase living standards
Potential rate of growth (PGR) + how are we rewarded?
LFG + PROGR
LFG = pop growth x LFP
the maximum rate at which a country’s econ can grow over time
-rewarded by more leisure time. went from 12 hour days 6 days a week to 5 day weeks max 40 hours weekends off and benefits
-higher income per capital + increased consumptions of goods and services
-better quality products
PPP
purchasing power parity = shows how many units of currency are needed in one country to buy the same amount of goods and services which one unit of currency will buy in the other country
Measuring the standards of living
1) GDP = does not fully capture the soft indicators of quality of life. not a representation of the population. we do not know how this income is distributed among the population (gini coefficient)
2) Human Development Index = school enrolment, health and crime, life expectancy, adult literacy rate.
Potential GDP
max level of output that a country can produce when the econ is operating at full employment unemployment rate 6%
Gap between potential and actual gdp = gdp gab or output gap
Recession
2 consecutive quarterly drops in real GDP
real gdp per person declines for 6 months or more
Depression
severe and prolonged contraction or stagnation in the level of production
-can last a couple years
