Economics Indicators¶

The Circular Flow & GDP¶

$GDP\ Deflator = \dfrac{Nominal\ GDP}{Real\ GDP} \times 100$

Three Types of Adults:

$Labor\ force = Employed + Unemployed$

$Unemployment\ rate = \dfrac{Number\ of\ unemployed}{Labor\ force} \times 100\%$

$Labor-force\ participation\ rate=\dfrac{Labor\ force}{Adult\ population} \times 100\%$

What is wrong with the unemployment rate:

Discouraged workers
- Nonworking people who are capable of working but have given up looking for a job due to the state of the job market
Part-time workers
Illegal labor

Three Types of Unemployment:

Frictional unemployment
- Unemployment due to the time workers spend in job search
- Temporarily, being between jobs
- Qualified workers with transferable skills but aren't working
- Exists even when number of job seekers = number of jobs offered
- Does not mean there is a surplus of labor
Structural unemployment
- Unemployment that results when number of job seekers > number of jobs offered
- Can be caused by
  - Technology progress
  - Change in the economic structure
  - Binding minimum wages
  - The actions of labor unions can have effects on minimum wages
  - The use of efficiency wages by firms
Cyclical unemployment
- Unemployment that results from economic recessions
- As demand for G&S falls, demand for labor falls
- When economic condition improved, cyclical unemployment will be reduced

Frictional unemployment and Structural unemployment are unavoidable

$Natural\ unemployment = Frictional\ unemployment + Structural\ unemployment$

$Actual\ unemployment = Natural\ unemployment + Cyclical\ unemployment$

Full employment is achieved if we have only natural rate of unemployment, i.e. No Cyclical Unemployment.